ORAL ANSWERS TO QUESTIONS

DEFENCE

The Secretary of State was asked—

Reserve Forces

Ann McKechin: What assessment he has made of the level of recruitment to the reserve forces in 2013 to date.

Ian Lavery: What assessment he has made of the level of recruitment to the reserve forces in 2013 to date.

Philip Hammond: May I first welcome the hon. Member for Gedling (Vernon Coaker) to his new role and congratulate him on his appointment? I hope that, in the interests of Britain’s armed forces, we will be able to have a constructive relationship, as he quite properly holds me to account for the decisions of this Government, and I hold him to account for the decisions of the last one.
	When the previous Administration took office in 1997, the Territorial Army was more than 50,000 strong. By the time they left office in 2010, that figure had halved. That pattern of decline has been arrested, and the strength has now been stabilised. Recruitment figures for the first three quarters of 2013 are due to be published by Defence Analytical Services and Advice on 14 November. This is a new data series, and quarterly figures will be published thereafter.

Ann McKechin: I declare an interest as a member of the Strathclyde area committee of the Lowland Reserve Forces and Cadets Association.
	Most people would describe the current recruitment target as challenging and difficult to meet. There appears to be a lack of clear strategy on recruiting more women and more people from the black and minority ethnic population in order to achieve that target. Will the Secretary of State explain how he intends to disseminate best practice in those areas?

Philip Hammond: I am grateful to the hon. Lady for raising that important point. At the moment, the armed forces recruit about 8% of their strength from women, who make up about 50% of the target age group population, and just 3% of their strength from black and ethnic minority communities, which will make up about 24% of the target age group population by 2020. We have to do better in those areas, and one of the challenges that we have set for the armed forces, and for the Army in particular, is for them to work out how they can pitch an offer that is more attractive to female and black and ethnic minority recruits, and specifically how they can use female recruits more effectively within Future Force 2020.

Mr Speaker: Ian Lavery—not here.

Catherine McKinnell: I recently joined more than 100 supporters of 2nd( )Battalion the Royal Regiment of Fusiliers as they marched on Parliament protesting against the Government’s decision to scrap it. Ministers believe that the battalion can be replaced by reservists, but the chairman of the Northumberland and North East Fusilier Association is concerned that it will be impossible to recruit the necessary numbers. Will the Secretary of State tell us to what extent the targets are being met?

Philip Hammond: The reconfiguration of the Army, including the changing role of reservists and the changing structure of the Army, are not simply about trying to recruit reservists to replace disbanded infantry battalions. Most of the reservists we recruit will be specialists, rather than having a light infantry role. The White Paper that I published earlier this year set out a plan to reverse the long-term decline of the Army Reserve, redefining its role and setting out details of improved equipment, training, terms and conditions. Under the plan, we will grow the Army Reserve to a trained strength of 30,000 by 2018. I can also tell the House that, although it is still early days, a snapshot of data for the recruiting campaign that started on 16 September is quite positive. We received 1,576 applications to join the Army Reserve during the first four weeks of the campaign, and 380 were received last week. It is very early days, but those early signs are quite promising.

James Gray: I congratulate the Secretary of State on the encouraging early signs in the recruiting campaign. There will come a time when it will become plain either that he will have achieved the Future Force 2020 ambition of replacing regular soldiers with reservists or that he has not done so and will have to change his plan. When will that date be?

Philip Hammond: The Army is in the final stages of setting out a properly thought-through recruiting target set, defining the number of recruits needed during each period of time in order to deliver the trained output required if we are to achieve our 2018 target. As soon as I have those data from the Army in final form, I will publish them. They will set our target curve, and I expect to be held to account if we go significantly off it.

Menzies Campbell: I hope that my right hon. and learned Friend will forgive me if I press him a little further on this topic. There is a lot of anecdotal evidence that the targets are proving difficult to achieve. Given that the target of 30,000 is fundamental to the success of the restructuring of the Army, what contingency plans are now in place, and what incentives are being offered to individuals—and their employers—to become part of the Army Reserve?

Philip Hammond: I am grateful to my right hon. and learned Friend. Unfortunately, I am not his “learned Friend”: I am used to being called an accountant, but not a lawyer. I can reassure him that a variety of measures are in place to incentivise recruitment to the reserves; in particular, a bonus to attract those leaving the regular Army into volunteer reserve service has proved very successful, with significant upturn in the translation rate over the past few months. There will be a range of further incentive measures that we can introduce as and when it is necessary in order to deliver the targets which I shall publish shortly.

Vernon Coaker: I thank the Secretary of State for his kind remarks, which I greatly appreciate. We will, of course, work with him where appropriate. I welcome to her post my Nottinghamshire colleague, the Under-Secretary of State for Defence, the hon. Member for Broxtowe (Anna Soubry), who I understand is the first woman Defence Minister in the House of Commons, which is a great credit to her.
	The Government need to explain to the House and the country today what is happening with their programme of reform to the armed forces. I declare an interest, as my soon to be son-in-law serves in the Territorial Army. A recent high-level memo from the Ministry of Defence states clearly that there are clear problems and worries over Army reform and that recruitment targets are likely to be missed. That has caused senior military figures, Members of the House and the armed forces community to raise serious concerns. Can the Secretary of State assure us that the nation’s security will not be compromised and that a reduction in the regular Army will take place only if adequate uplift in the reserves is achieved?

Philip Hammond: I am grateful for the hon. Gentleman’s question. The memo from which he quoted did not say what he claimed it said. It said that in the absence of any action to stimulate recruitment we would face a very difficult challenge. We are now taking precisely that action. The hon. Gentleman may have seen an article that came from an interview with the Chief of the Defence Staff, in which he made it clear that he was very confident that we will deliver these numbers. I share that confidence.

Vernon Coaker: We look forward to the Defence Secretary publishing that memo so that we can all see what it actually said. Is not the problem one of credibility? The Government cannot get their figures right. Just today, we learned that the cost of new aircraft carriers has increased by £800 million to £6.2 billion. That is after the £100 million wasted last year on reversing the decision on fighter jets. A few months ago, the Defence Secretary told us he had balanced the books at the MOD, and then just a few weeks ago we were told that there was an £1.8 billion underspend. How can the British public have confidence that the Government will meet their target for recruitment to the reserves when they have got so much else wrong? When will the Defence Secretary take some responsibility and stop blaming everyone else but himself?

Philip Hammond: With that last remark, the hon. Gentleman has probably pre-empted my response. If I were him, I would tread a little more carefully around the issue of the cost of the aircraft carriers—until he hears, in due course, what precisely we have done. A huge amount of work is going on across the Army around the reserves recruitment initiative. There are many different strands to this work. I have made a commitment in the past, which I will repeat today, to be as transparent as possible with Parliament as this campaign gets under way. I remind the hon. Gentleman, however, that we are just five weeks into a five-year campaign to halt and reverse the attrition in our reserves that the previous Government oversaw.

Patrick Mercer: In my experience, inquiries about recruiting by no means turn into enlistments. Everything we have heard suggests that the recruiting for the reserves will be difficult. Was it therefore correct for our regular forces redundancy programme to have gone ahead with the urgency that it did?

Philip Hammond: Perhaps my hon. Friend did not hear me earlier. I was not talking about inquiries; I was talking about 1,576 applications to join the Army Reserve
	in the first four weeks of the campaign. The simple fact is that if we are to live within our budgets and restructure the Army for its tasks in the future, the decisions we made about the size and shape of the regular Army must go forward, and the recruitment and training of 30,000 Army reserves must happen. We will make sure that they do so.

Mr Speaker: Progress on the first question was desperately slow; we really need to pick up.

Small and Medium-sized Enterprises

Huw Irranca-Davies: What assessment he has made of the level of contracting by his Department with small and medium-sized enterprises; and if he will make a statement.

Philip Dunne: As I have said in the House before, the Government understand the significance of SMEs to the United Kingdom’s economy. The Ministry of Defence is playing its part in increasing the number of opportunities for SMEs to contribute to defence, both as direct suppliers and as subcontractors on major programmes. We recently published details of the MOD spend for 2012-13. Some £1.1 billion was spent directly with 12,000 SMEs. During that year, 10% of all new contracts by value and 36% by number were placed with more than 1,000 SMEs.

Huw Irranca-Davies: Jobs in the supply chain are vital to constituencies such as Ogmore, but I understand that last year the MOD was fined £21,000 for making late payments to suppliers. The new contracts and direct payments that were promised by Ministers have not materialised. Can the Minister explain to SMEs in the supply chain in Ogmore and throughout the United Kingdom why the Government’s actions do not match their rhetoric?

Philip Dunne: I am very glad that the hon. Gentleman has chosen to light on the single late payment penalty that the MOD suffered in just one of the 4 million transactions that took place in 2012-13. It involved a company that was not based in Ogmore, not based in Wales, and not based anywhere else in the United Kingdom. It was for late payment for aviation fuel sent by a supplier to our base in Akrotiri in Cyprus, with an invoice from a Greek company in Corinth, over the Christmas holidays. The Ministry of Defence pays 92% of its bills within five days, and has a better record in that regard than any other Department.

Jeremy Lefroy: I greatly welcome the letting of the main contract for the expansion of MOD Stafford to enable it to receive two more Signals regiments. Will the main contractor be encouraged to work with local SMEs which offer value for taxpayers’ money?

Philip Dunne: I think that my hon. Friend is referring to facilities management contracts which are being placed on a regional basis. The contractors will of course undertake to use SMEs in their supply chain, but it will be up to them to decide where they place their contracts,
	so I cannot give my hon. Friend any specific reassurance relating to how many of the subcontracts will go to Staffordshire companies.

Alison Seabeck: Although reassuring in many respects and full of detail, the Minister’s response will not give much comfort to SMEs that hold subcontracts with Serco and are awaiting the outcome of the Cabinet Office review, which I assume has been further delayed following this afternoon’s announcement by the Serious Fraud Office. This matter is of serious concern to, for instance, those involved in the consortiums that are bidding for the GoCo. When does the Minister expect a firm decision from his colleagues on whether the MOD can let further contracts to Serco?

Philip Dunne: As the hon. Lady said, there has been an announcement following the Serious Fraud Office inquiry into two contractors, which was first highlighted by the Ministry of Justice in its announcement of 26 September. I cannot give her any information about when the SFO will complete its inquiries, and she would not expect me to do so. Until that has happened, we shall not be in a position to make any comment on Serco itself.

Sheryll Murray: A constituent of mine is considering installing on his farm an anaerobic digestion plant that could supply heat to HMS Raleigh. Will my hon. Friend agree to meet my constituent and me to discuss that?

Philip Dunne: I am grateful to the hon. Lady for mentioning her interest in encouraging the supply of renewable energy to Ministry of Defence bases throughout the country as well as in her constituency. The matter that she has raised is the responsibility of the Under-Secretary of State for Defence, my hon. Friend the Member for South West Wiltshire (Dr Murrison), but I am sure that one of us will be happy to meet her as soon as possible.

Typhoon Exports

Mark Menzies: What discussions he has had with his counterparts in partner nations on improving the prospects of future Typhoon exports.

Philip Dunne: Since the Government took office in 2010, they have reversed a decade of neglect in support for defence exports. Ministers from the Prime Minister down have taken a particularly proactive lead among our partners in encouraging Typhoon exports. Eurofighter Typhoon continues to attract global interest through active participation in a number of campaigns, which are likely to come to a head over the next couple of years. Last week, when I met counterparts from our three partner nations, we agreed to refocus our collaborative programme to improve Typhoon’s export prospects in those campaigns around the world.

Mark Menzies: Does the Minister believe that to keep the Typhoon production line running in the future, the Eurofighter consortium must be much more agile in its corporate governance in order to help export potential?

Philip Dunne: In our meeting last week I made very clear to both industry and our Eurofighter partners that we need an increased focus on responding to export requirements, which will play an increasingly important part in extending production lines for this aircraft, including in my hon. Friend’s constituency. We agreed that fundamental reforms are needed to speed up decision-making processes within the governance structure, which will make it more responsive both to the requirements of partner nations and to export customers.

RNAS Yeovilton and RNAS Merryfield

David Heath: What his plans are for the future use of RNAS Yeovilton and RNAS Merryfield; and if he will make a statement.

Andrew Murrison: I am pleased that my hon. Friend has asked about Yeovilton, where a number of our constituents work and where I have served. I am also pleased to assure him of our intention that Yeovilton will remain a royal naval air station with, additionally, 1 Regiment Army Air Corps based there as a lodger unit. Indeed, the Ministry of Defence is investing heavily in Yeovilton in order for it to be the main operating base for all Wildcat helicopters flown by the Royal Navy and the Army. Merryfield, as my hon. Friend will know, is a satellite airfield of Yeovilton and will continue to be used for training.

David Heath: I am most grateful; the deployment of the Army Air Corps at Yeovilton is very good news for both Yeovilton and the surrounding area, even if we will have to get used to different coloured uniforms around the place. Given that the AAC uses Salisbury plain predominantly for training purposes, will the role of Merryfield be changed in future and will the Minister let me know if that is to be the case?

Andrew Murrison: The answer to the last question is yes, of course I will let my hon. Friend know, but Merryfield will continue as a satellite to Yeovilton. He is right to say that the colour, as it were, of many of those working in Yeovilton will change—it will become more khaki—and that means Salisbury plain training areas will be used rather more. I reassure my hon. Friend that that probably means that his constituents are unlikely to be disturbed by too much low flying, which I know is a concern from time to time to a number of us who have military aviation operating in our areas.

Royal Air Force (ISTAR)

Steven Baker: What recent assessment he has made of the future Royal Air Force requirement for intelligence, surveillance, target acquisition and reconnaissance systems; and if he will make a statement.

Mark Francois: Joint Forces Command is leading an air intelligence, surveillance, target acquisition and reconnaissance—ISTAR—optimisation study looking at all Defence requirements, not just the RAF’s, and capabilities in air-based ISTAR.

Steven Baker: A system such as Sentinel R1 is surely absolutely crucial to the proportionate and precise use of armed force in the future, so can the Minister reassure me that he is working to ensure that the armed forces rise above their usual rivalry to enable these systems both to be taken forward and developed deeply in the interests of our country and our forces?

Mark Francois: I have heard it suggested that occasionally down through the centuries there has been a tad of friendly rivalry among the different armed services, and as my hon. Friend is a former RAF officer, he may well be aware of that. We are well aware of the capabilities that are provided by the Sentinel platform. We value those capabilities and we are examining how we might be able to use them further in the future.

Jim Dobbin: How were the important RAF intelligence and surveillance services operating from RAF Gibraltar affected by the serious incident when a Guardia Civil vessel connected with an escorted royal naval vessel during which the vessels’ guns were pointed at each other?

Mark Francois: Last week’s actions by the Guardia Civil were completely unacceptable. They were both unlawful and irresponsible, placing themselves and others in unnecessary danger. I can tell the House that we have made a formal protest to the Spanish Government, and ministerial colleagues in the Foreign Office will be raising this matter with their Spanish counterparts at the first opportunity.

James Arbuthnot: Given that we are a maritime nation, does my right hon. Friend agree that in the next defence and security review a maritime patrol aircraft should receive high priority?

Mark Francois: That will, indeed, be one of the issues we look at in some detail in the context of the next SDSR. As my right hon. Friend is the Chairman of the Select Committee on Defence, he will be well aware that there were serious problems with the previous programme, because it was way over budget and, unfortunately, technically did not ultimately work. Perhaps I may remind the House who was in government for most of the time that that programme was running; it was not us.

Angus Robertson: To reinforce the point made by the Chairman of the Defence Committee, the UK’s armed forces are unique among those in northern Europe in having not a single fixed-wing maritime patrol aircraft. Given the time scale that the Minister has talked about for this review, what is the earliest date by which the UK may have maritime patrol aircraft?

Mark Francois: As I have explained to the House, we will be looking at this in the context of the next strategic defence and security review. The hon. Gentleman asks me for early dates, so perhaps he can share with the House the earliest date by which the Scottish nationalists will tell us how they will afford the defence programme that they envisage. We are all dead keen to know.

Gerald Howarth: May I support what was said by my right hon. Friend the Member for North East Hampshire (Mr Arbuthnot), the Chairman of the Defence Committee, as the loss of the maritime patrol aircraft capability is the most serious loss we face at the moment? May I urge the Minister not just to push this out to the SDSR of 2015 but to reassure the House that work is being undertaken by the Ministry of Defence today to find ways to remedy that serious capability loss?

Mark Francois: As my hon. Friend—again, a former RAF officer—will be aware, we already work with allies in a number of ways to fill that gap, but I assure him that we will look at the issue seriously in the wider context of ISTAR and of the SDSR.

Employment (Service Leavers)

Duncan Hames: What steps he is taking to improve the employment prospects of service leavers.

Anna Soubry: We attach great importance to assisting service leavers in making a successful transition from service life into civilian employment. A recent defence statistics study shows that about 85% of the service leavers in 2011-12 who have a known employment outcome are employed within six months of leaving the armed forces. But we are not complacent, and we continue to review whether there are areas we should improve. Indeed, Lord Ashcroft, the Prime Minister’s special representative on veterans’ transition, is leading a review of the provisions that are in place.

Duncan Hames: I am very glad to hear that. Service leavers undoubtedly have much to offer employers. Wiltshire has more than 15,000 military personnel and the number is rising. Will the Minister look favourably on Swindon and Wiltshire local enterprise partnership’s city deal bid, which will help service leavers to gain the qualifications they need and ensure that they are not disadvantaged compared with the civilian population in seeking work?

Anna Soubry: Absolutely, and I am more than happy to congratulate my hon. Friend and all others who champion such schemes. This is another reason why we attach so much importance to the corporate covenant, of which I wish to give one quick example. National Express has signed up to the corporate covenant—we urge many other companies, of whatever size, to do so —and will guarantee anyone leaving our armed forces an automatic interview for any job vacancy. That is a good example of why the corporate covenant is to be welcomed.

Barry Sheerman: The Minister knows that these servicemen and women make very good teachers and very good professionals in almost any sector. What has happened to the scheme to get them into the classroom, and could we use them more in leading apprenticeship programmes?

Anna Soubry: I do not know of any problems in that regard. I am more than happy to make further inquiry and update the hon. Gentleman by way of a letter, but my understanding is that this goes from strength to strength.

Home Ownership

Caroline Nokes: What funding his Department makes available to help armed forces families to get on the housing ladder.

Glyn Davies: What steps he is taking to help improve home ownership among members of the armed forces.

Anna Soubry: The Secretary of State for Defence recently announced that £200 million has been allocated for the creation of the forces Help to Buy scheme. Launching on 1 April 2014, it will significantly improve the support available to members of the armed Forces who wish to buy their own home. Forces Help to Buy will offer the men and women of our armed forces a deposit loan of 50% of their annual salary, up to a maximum of £25,000. The loans will be interest-free and repaid over an affordable 10-year period. As well as that additional funding, there will be tailored advice on financial and housing matters. Of course, service personnel are also afforded high priority and additional flexibility under the Chancellor’s main Help to Buy equity share scheme.

Caroline Nokes: I thank my hon. Friend for that response. What reassurance can she give my armed forces constituents, particularly those in the Army Air Corps at Middle Wallop, that they will be able to combine this new scheme with the schemes already put forward by the Department for Communities and Local Government, in an example of joined-up government?

Anna Soubry: There should not be any difficult in doing that at all. I should add that I am always more than willing to come to see some of the excellent accommodation that I know exists already at Middle Wallop, and I look forward to doing so.

Glyn Davies: Armed forces personnel inevitably experience more difficulty accessing home ownership because they often have to move to different parts of the country because of different postings. Has my hon. Friend considered reducing the frequency of such movements to enable greater take-up of home ownership among the armed forces?

Anna Soubry: I absolutely agree with my hon. Friend. That is why the new employment model that we are developing will deliver an offer to regular service personnel that supports domestic stability by reducing the frequency of moves and supports partners’ employment. We know that issues such as those two points often concern members of our armed forces and lead to a lot of dissatisfaction.

Gisela Stuart: Often the problem is the availability of housing. Will the Minister update the House on what discussions have been had with local authorities in general and Birmingham city council in particular about the provision of extra housing?

Anna Soubry: I am not aware of any discussions. I do know, however, the great benefits that the community covenant has brought in and I have no doubt that Birmingham is fully signed up to it. If I need to, I am more than happy to make further inquiries and write to the hon. Lady.

Gemma Doyle: I welcome the hon. Lady to her new role and thank her for her answer to my written question about low morale in the armed forces, in which she admitted that it has doubled over the past three years from 15% to 30%. She will be aware that the quality of and access to housing, along with pay and allowances, are key factors in forces’ morale and that of their families. Will she guarantee that it will not plummet further on her watch?

Anna Soubry: I wish I could guarantee that it will not plummet any further, but I strongly suspect that this has been a long-standing problem. I am pleased to say that the Government take it seriously, which is why we are doing the many things that we are doing precisely to address those issues.

Nigel Adams: What estimate has the Minister made of the number of service personnel who could benefit from the new forces Help to Buy scheme?

Anna Soubry: I cannot give my hon. Friend a figure, but as the scheme is worth £200 million we can be confident that it will be many thousands.

Mr Speaker: I call Sir Tony Baldry.

Tony Baldry: My hon. Friend the Minister has ably answered the question I was going to ask, Mr Speaker.

Mr Speaker: That is a remarkable self-denying ordinance. If the Minister wants to say something, we must not deny her the opportunity in her maiden performance in this portfolio.

Anna Soubry: As ever, I express my grateful thanks to my hon. Friend.

Reservists

Jim Cunningham: What recent assessment the Government have made of how many reservists need to be recruited as part of the Army Reserve plan to replace regular troops from the disbanded units.

Philip Hammond: I should make it clear to the hon. Gentleman, as I have already this afternoon, that we are not recruiting reservists simply to replace regular troops from disbanded units. We are changing the structure and functions within the Army, creating a whole force of regulars, reservists, civilians and contractors that will make the best use of our resources and harness the talents across the whole of UK society. As I have already said, the Army is finalising a set of recruiting targets that will at different
	points over the next four years deliver the numbers into training that we need to achieve the challenging goal of 30,000 trained reservists by 2018.

Jim Cunningham: Given that the Secretary of State is constantly moving the goalposts and that we know that he will not recruit the number of reservists that he needs, why does he not reinstate the two battalions of the Royal Fusiliers? That will give him the manpower he needs, so why does he not retrain those people?

Philip Hammond: I do not know where the hon. Gentleman gets his information from, but as I said earlier we are five weeks into a five-year recruiting campaign, and I do not see anything about his track record that would lead me to give any particular credence to his prediction about how successful that campaign will be.

Julian Brazier: In supporting my right hon. Friend’s robust stance, may I urge him to look into the truly staggering level of delays and mistakes in the Army enlistment process? Will he urge the Army recruiting group to prove it is serious by at least getting Army recruiting offices open on evenings or at weekends?

Philip Hammond: I am grateful to my hon. Friend for that question and freely acknowledge that there have been teething problems with the IT support systems for the recruiting campaigns for the Regular Army and Army Reserve. I was in the Army recruiting centre myself last week with the Chief of the General Staff. This matter has the highest level of attention, both ministerial and military, and a number of initiatives will be implemented over the next few days and weeks that I will expect to deliver a significant improvement in the areas that my hon. Friend highlights.

Russell Brown: I suspect that we will experience regional variations in recruitment, with it being more difficult in some localities than in others. In answer to Question 1, the Secretary of State mentioned that he will produce certain data. Among those data, will there also be an indication of where there are difficulties and what extra efforts are being made at those locations?

Philip Hammond: The targets that we will publish will be national, but the hon. Gentleman is right that there will be different recruiting challenges in different parts of the country. The job for us is to ensure that the Army recruiting centre, the senior officers responsible for it and their recruitment partners, Capita, are agile enough to respond to the data coming in from the front line in the recruitment campaign and flex that campaign accordingly. The plan will not be implemented without change over five years; it will be highly responsive and we will monitor it regularly.

Edward Leigh: As the Secretary of State has confirmed again today that failure to achieve the reservist recruitment numbers is not an option, surely there is now no difficulty in his repeating the pledge given by his predecessor that the Regular Army will not be cut until those reservists are recruited.

Philip Hammond: Any such pledge would be an unfunded spending commitment. We must live within the envelope of resources that we have available, and we have to restructure the armed forces to deliver the configuration we need for Future Force 2020. That means drawing down some regular units and providing support from reserve units, civilians and contractors for some tasks that were previously done within the Regular Army.

Claro Barracks

Julian Smith: With reference to the Army basing review, what recent discussions he has had on the closure of Claro barracks in Ripon; and if he will make a statement.

Andrew Murrison: I am grateful to my hon. Friend for his question. He will be acutely aware of the close links between Ripon and the Army, particularly the Royal Engineers. A meeting was held on 4 October 2013 with officials from Harrogate borough council and Ripon city council to discuss the implications of the Army basing plan and the relocation of 21 Engineer Regiment, Royal Engineers. The Department will continue to maintain contact with stakeholders as plans mature. I understand that the next meeting will have taken place by the end of November.

Julian Smith: I thank the Minister for that answer. Ripon is coming to terms with the loss of the base, but we are still waiting for the Ministry of Defence’s decision on whether it ultimately wants to get out of Deverell barracks or Claro barracks. May I urge him to push forward that decision now, so that plans can be made for the future and Ripon is best placed to deal with a difficult time?

Andrew Murrison: I fully understand my hon. Friend’s concerns. The announcement that has been made relates to the removal from Ripon of 21 Engineer Regiment, Royal Engineers, as we consolidate around Catterick. The separate but adjacent site, Deverell barracks, and the associated training area have not been subject to that announcement. A decision on them will be made separately, but I understand that the two sites are very much linked.

Procurement

Nick Smith: What account his Department takes of the social and economic effects of its procurement decisions in the UK.

Philip Dunne: Last year, we published the White Paper, “National Security Through Technology”, setting out the purpose of defence procurement—namely, to provide our armed forces with the best capabilities we can afford while obtaining the best possible value for money. The Ministry of Defence makes a significant contribution to the UK economy—approximately £20 billion of annual spend sustaining many highly skilled jobs in communities the length and breadth of Britain—but we also support the defence industry in the UK through active help in export campaigns and in supporting the defence growth partnership, where we share its vision to secure a thriving UK defence sector.

Nick Smith: It is good that the NATO summit will be held in Newport in Wales next year. Will the Minister please update me on the procurement of the Scout vehicle, which is important for jobs in the south Wales valleys?

Philip Dunne: I add my support to the hon. Gentleman’s efforts to ensure that the NATO summit in Newport is a great success next year. The Scout vehicle is proceeding in its demonstration phase and has passed a number of milestones. As he is aware, it is due to be delivered as part of Future Force 2020. I will not be able to give him an update on the next placing of contracts until such time as the main investment case has been made.

Peter Luff: It will not surprise the Minister to learn that I entirely agree with his answer, but may I ask him, on the day when Professor John Perkins’ review of engineering skills has revealed a serious shortage of those skills in this country, what assessment he has made of the impact of that shortage on the defence industries in particular, and on the nation’s operational advantage and freedom of action?

Philip Dunne: I thank my hon. Friend for all his work in stimulating interest among our young people in taking up engineering careers, particularly so that they can take up the many hundreds of engineering jobs for which the Ministry of Defence and the armed forces seek to recruit every year. We are doing a lot of work, not least through the Bloodhound initiative—a project with which he was intimately involved—to raise awareness of engineering skills in the armed forces, and to encourage young people to consider maths, science and engineering as future careers.

Outsourcing

Joan Walley: What contracts for recruitment of armed forces personnel have been outsourced to date; and what arrangements are in place to monitor such contracts.

Philip Hammond: The Ministry of Defence has not outsourced the recruitment of armed forces personnel, but the Army has entered into a recruiting partnership with Capita, and once the contract is fully operational, payment will be linked to the number of recruits required by the Army. I have already acknowledged that there have been teething problems with the IT support for the contract, but the issue has the attention of those at the highest levels in the Army and in the ministerial team.

Joan Walley: We have heard a lot this afternoon about recruitment and how critical it is to the White Paper, and how difficult it will be to meet the target that has been set. Given the real difficulties with recruitment on the ground—I am referring to unanswered e-mails, lack of communication between departments and lost forms—will the Secretary of State hold an urgent investigation into the way that Capita plays its part in the joint venture, with particular reference to candidate support managers?

Philip Hammond: Yes; we are already doing this. The initiatives that I mentioned to my hon. Friend the Member for Canterbury (Mr Brazier) are designed to deal with specific problems with the way in which the
	website interacts with mobile devices, and the way that we deal with medical records and with inducting candidates through the interview process. We will reintroduce, on a pilot basis, the idea of a face-to-face weekend process that deals with all the procedures in one hit. If that is successful, we will make it the default option for 2014.

Andrew Bridgen: What discussions has my right hon. Friend had with large public and private sector employers to see how they can better support our reservists to improve the recruitment and, equally importantly, retention of our volunteers?

Philip Hammond: That is absolutely the key to the programme. In the public sector, central Government have made a generous offer of an additional 10 days’ paid leave to reservists in the central Government service, so that they can take those days for training. Many major private companies have already signed up to the corporate covenant, and more are considering doing so. There are excellent examples of companies working with us to reach out to their employees, and to make a joint proposition to them, so that employees join the reserves in a way that is supported by their employer, not done behind the employer’s back.

Cyber-attacks

Justin Tomlinson: What new capabilities the armed forces are investing in to ensure the UK can properly defend itself from cyber-attacks.

Mark Francois: In September, my right hon. Friend the Defence Secretary announced the creation of the joint forces cyber group and plans to develop a cyber counter-attack capability. That and other Ministry of Defence measures are part of the £650 million cross-Government investment in cyber that was announced in the strategic defence and security review in 2010.

Justin Tomlinson: Does the Minister agree that in addition to strengthening our cyber-defences, we need to deter attacks? What plans does he have to improve UK deterrence in the cyber-domain?

Mark Francois: In addition to the more than £600 million to which I referred, a £210 million investment to further bolster our cyber-defences was announced by the Chancellor in a statement to Parliament on 26 June this year. That is a clear indication that cyber will play a role in a national deterrent posture. It is critically important to the country, and that is why we are investing in it.

Yvonne Fovargue: It is reported that convicted hackers could be recruited to Britain’s cyber-defence force. What assurances can the Minister give that robust and sufficient measures will be in place to ensure that national security will not be compromised as a result?

Mark Francois: I can tell the hon. Lady, and indeed the House, that cyber-reserves will be subject to the same stringent vetting process as other members of the Ministry of Defence. Regarding criminal convictions, all applicants
	seeking to join the regulars or reserves are looked at individually, and a decision is made based on the type of conviction and sentence imposed. No one will be employed as a cyber-reserve if there is evidence that they represent a security risk which means that they cannot pass the vetting process.

Trident Alternatives Study

Julian Lewis: What assessment he has made of the conclusions and utility of the Trident alternatives study.

Philip Hammond: I can tell my hon. Friend that the review demonstrated that no alternative system is as capable as a Trident-based deterrent, or as cost-effective. As to the utility, carrying out the review fulfilled a Government commitment but did not produce any unexpected conclusions.

Julian Lewis: Yes, well, it is good to know that the review came to such a predictable and predicted conclusion, but what does my right hon. Friend think of the fact that our coalition partners, the Liberal Democrats, have not adopted any of the options from the review but have decided instead to come off continuous at-sea deterrence and have only two Trident submarines? This was rejected as unworthy of consideration by the review, but now that even the Liberal Democrats want two submarines, should we take up the suggestion of the shadow armed forces Minister, the hon. Member for North Durham (Mr Jones), and try to sign a contract for them?

Philip Hammond: As my hon. Friend suggests, the reason a two-boat solution was not considered in the review is that it did not meet the hurdle test of providing a credible deterrent. I am actually rather more interested in the views of official Opposition Front Benchers on this matter than the views of our coalition partners. I welcome the fact—[Interruption.] Hang on a minute. I welcome the fact that the first visit in office by the hon. Member for Gedling (Vernon Coaker) was to Barrow-in-Furness, the home of Britain’s submarine fleet.

Kevan Jones: On the alternatives review, at Defence questions on 2 September the Secretary of State told my right hon. Friend the Member for Delyn (Mr Hanson), who had asked about costs:
	“If he submits a written question to me, I will ask the Department to produce the best estimate”.—[Official Report, 2 September 2013; Vol. 567, c. 5.]
	I have now tabled a number of parliamentary questions, but the Government seem to be refusing to produce a figure. May I gently ask the Secretary of State when he will produce the answer to my questions?

Philip Hammond: I am rather glad that the hon. Gentleman asked me that question. Let me tell him that the Cabinet Office has the lead on this matter because it was a Cabinet Office review. Any question that is phrased in general terms will be answered by the Cabinet Office; were a question to be phrased in very specific terms as to Ministry of Defence resources, then it would fall to me to answer it.

Topical Questions

David Heath: If he will make a statement on his departmental responsibilities.

Philip Hammond: My first priority remains the success of operations in Afghanistan. Beyond that, my priorities are to deliver the sustainable transformation of the Ministry of Defence, to build confidence within the armed forces in the Future Force 2020 model, to reinforce the armed forces covenant, to maintain budgets in balance, and to deliver equipment programmes on time so that our armed forces can be confident of being properly equipped and trained.

David Heath: As we move towards a weekend when we honour the fallen, and also, I hope, bear in mind those who currently serve and veterans of our armed services, does the Secretary of State wish to congratulate the 80% of councils that have now signed up to the community covenant? Will he also follow up the one in five local authorities that have not done so? Surely that is the least they owe to those who serve in our armed forces.

Philip Hammond: I am grateful to my hon. Friend. The Under-Secretary of State, my hon. Friend the Member for Broxtowe (Anna Soubry), reminds me that 372 local authorities have signed up, and that is well over 80%. We anticipate that there will be a surge of further authorities signing in the run-up to the act of remembrance on 11 November. However, once that milestone is out of way, I will be more than happy to answer a question listing the authorities that have not signed up, should any Member feel minded to ask me such a question.

Jeremy Corbyn: Will the Secretary of State tell the House how much money has so far been spent on preparations for the replacement of the Trident submarine system and, of course, the missile warheads that go with it, and what representations he has received within the higher echelons of the military not to go ahead with the replacement of Trident but to spend the money on something else?

Philip Hammond: As I have told the hon. Gentleman before, the figure is approximately £3 billion of commitments so far on design and early lead items. I am racking my brains, and I think I can say to him that since I have been in this post, which is just over two years, I have received no representation against the renewal of Trident from any senior officer in the armed forces.

Chris Heaton-Harris: What progress has my right hon. Friend made with the renegotiation of the aircraft carrier contract?

Philip Hammond: Negotiations with the Aircraft Carrier Alliance are ongoing, but we believe they are close to reaching a conclusion. As soon as we have information to convey to the House, I will seek an early opportunity to make a statement.

Michael McCann: The Coroners and Justice Act 2009 allows military families based in Scotland to request that an investigation into an operational death overseas be transferred to Scottish jurisdiction for a fatal accident inquiry. A written answer has revealed that, thus far, no families have made such a request. Could Ministers reassure the House that the information is being disseminated to families?

Anna Soubry: I am grateful for that question. I am aware of the difficulty and that is also my understanding of the issue. I will make further inquiries. Of course, one of the problems we know we will face is when we have bereaved families both north and south of the border and what will occur in such circumstances. I would be more than happy to discuss the issue further with the hon. Gentleman.

John Baron: Parliament sent a very clear message to the Government—the vote was 92 to nil—not to disband regular units until we were sure that the Army Reserve plan was both viable and cost-effective. What plans do the Government have to enact Parliament’s will?

Philip Hammond: As I have said in answer to an earlier question, it is just not possible, within the resource envelope available, to maintain the regular forces at their previous level while also recruiting and building the reserve. Neither would it allow us to restructure the force in the way necessary to deliver the outputs required from Future Force 2020.

Jenny Chapman: Darlington is home to many forces families, probably because we are so close to Catterick garrison. What more are the Government going to do to support families moving between postings, particularly those who have children with additional needs?

Mark Francois: As the Under-Secretary of State for Defence, my hon. Friend the Member for Broxtowe (Anna Soubry) has already indicated, we are looking at the range of accommodation we provide for service families. Under the new employment model, we also hope to be able to provide greater stability for armed forces personnel. We will still move them, in the interests of the service, but we hope, in many cases, to do so less frequently than we used to. I hope to visit Catterick garrison next week and perhaps this could be one of the things I look at while I am there.

Alun Cairns: Cyber-defence is an important part of national security, as well as, obviously, economic regeneration. A number of nations are seeking to restructure the current form of internet governance. What action are Ministers taking to work with Cabinet colleagues to ensure a co-ordinated approach?

Mark Francois: The Foreign Secretary recently mooted some proposals and we discuss the matter frequently, both with other Government Departments and with
	international allies. This matter is in the interest of all our security and we take it very seriously.

Bill Esterson: Small businesses in my constituency tell me that late payment threatens their survival and the jobs of their staff. Ministers can quote all the figures they like, but they have to accept that late payment by the MOD is a real problem for some small businesses.

Philip Dunne: If the hon. Gentleman was in the Chamber and listening to my earlier response to the Member for Ogmore (Huw Irranca-Davies), he will have heard that there was a single example of a penalty for late payment out of 4 million transactions last year. Where is the evidence to substantiate the allegation made by the hon. Member for Sefton Central (Bill Esterson)?

Nigel Adams: What discussions has the Secretary of State had with European Ministers on preparations for the European Council on defence?

Andrew Murrison: Discussions have been extensive, as my hon. Friend would expect. The December Council summit is very important and I am pleased to say that we have been leading like-minded partner nations in the debate to set the agenda, which will be very much about capability and complementarity with NATO. It will most certainly not be about laying down more concrete, which is a prerogative of sovereign states, or, indeed, instituting more command wiring diagrams, which has absolutely nothing to do with our collective security and defence, and everything to do with the misguided political nostrum of ever-closer union.

Ian Lavery: Seven Territorial Army centres in the north are set to close by 2016. How on earth will that assist the Government in recruiting up to 30,000 reservists before 2018?

Philip Hammond: As we announced in our reserves basing plan, a small number of TA centres will close and consolidate. We have made a commitment that we will provide reservists with the latest equipment and training opportunities with their regular Army counterparts. We can do that only by consolidating so that there are units of critical mass. In most cases, the consolidations are taking place within urban conurbations. We expect there to be few cases of people who are not within reasonable travelling distance of the next nearest reserve base.

Jack Lopresti: Given that the MOD’s figures suggest that the present TA mobilisation rate is 40%, what research or evidence is there to justify the Secretary of State’s contention that that mobilisation will be doubled under the reserve forces plan?

Philip Hammond: I am not entirely sure that I understand my hon. Friend’s question. Under Future Force 2020, we would expect the reservist component of the deployed force on an enduring operation eventually to get to
	40%. The construct that we are planning is designed to support that level. That level is still lower than what many of our English speaking allies routinely expect to use.

John Cryer: Given the 20% cut in the Army, what representative structures exist so that the understandable concerns of servicemen and women can be heard in Whitehall and the upper echelons of the armed forces?

Mark Francois: Of course, we have something called the chain of command. We also have a number of other bodies such as the Army Families Federation, which represents service families very effectively in my experience. In the Ministry of Defence, we never lack advice, but we also do our best to provide solutions.

George Hollingbery: The Meon Valley constituency is home to many who work in the defence sector for companies such as Northrop Grumman, Chemring, Cobham and many smaller defence-related businesses. Will the Secretary of State update the House on what efforts the Government are making to boost employment in this sector, which is so important to the prospects of many of my constituents?

Philip Dunne: The three companies to which my hon. Friend refers are important suppliers to the Ministry of Defence through both open competition and single-source capability. I encourage each of those companies to continue bidding for relevant MOD contracts when they are advertised through the portals that are well known to them. I have met representatives of each company at recent defence company exhibitions both in the UK at the Defence Security and Equipment International exhibition in September and overseas. Along with Ministers from other Departments, we actively support responsible defence exports by all quality British companies.

Nicholas Dakin: What is the MOD doing to improve its communication with local communities when bases, such as the one in Kirton in Lindsey, are being transferred out of MOD ownership?

Andrew Murrison: We engage with all stakeholders. It is vital, as we restructure, that we take local authorities with us. Our record across the country has been very positive in that respect.

Nick Harvey: I agreed with much of the Minister’s reply about the European Defence Council meeting in December. However, when do the Government expect to announce the review of Britain’s membership of the European Defence Agency? Given that we have rightly criticised other European nations for a lack of defence effort, would it not be perverse to turn our back on one of the few practical ways of doing something about it?

Andrew Murrison: The European Defence Agency has its merits. We have been perfectly up front about that. However, it also has its problems. This country has been helpful in guiding the EDA as it evolves and we are keeping the matter under review. Our experience is that that approach has been effective in procuring the change
	that is needed in the way the EDA operates and in the efficiency with which it operates. We will continue in that light.

Huw Irranca-Davies: The Minister’s earlier response to me was shockingly complacent and refused, notably, to deal with new contracts and the failure to roll out direct payments, as the Government said they would. Will he respond to my constituents who run small and medium-sized enterprises that supply the MOD? They said:
	“The MOD remains as inefficient as ever…Their commercial support is lacking and things take for ever to finalise…The MOD is in a mess in some areas we deal with.”

Philip Dunne: I am sorry that I disappointed the hon. Gentleman, who had clearly got his facts wrong when he stood up the first time. This Ministry pays 92% of bills within five days, and we make arrangements specifically for small and medium-sized companies to make part payments to assist them with their cash flow. I would be happy for the hon. Gentleman to write to me if he has any other specific evidence to substantiate his claim.

Bob Stewart: May I ask my right hon. Friend what percentage of the £1.8 billion allocated to bolster reserve forces has been spent already?

Philip Hammond: I cannot give my hon. Friend a precise answer because some of the money is committed to infrastructure, and some to equipment programmes that are in the process of being rolled out. Perhaps I can offer him a written answer that will provide some indication of where we are in this process.

Jim Dobbin: In the recent dispute between Spain and Gibraltar, would it be appropriate to threaten the withdrawal of the British ambassador to Spain before somebody is injured?

Andrew Murrison: I am grateful to the hon. Gentleman for his question, but that is, of course, a matter for the Foreign Secretary. As my right hon. Friend has already said, we utterly condemn the action taken by the Guardia Civil, which was distinctly unhelpful. Not only is it an invasion of sovereign territory, but it is also dangerous. The Guardia Civil cannot continue operating like that and expect that nobody will get hurt.

Tobias Ellwood: May I invite the Secretary of State to commit to operating both aircraft carriers? A single carrier can be operational for only two thirds of the year, whereas a second carrier would ensure that we have year-round capability and allow us to work up not only a carrier strike but expeditionary capability as well.

Philip Hammond: I am grateful to my hon. Friend—nice try. As he knows, however, it will be decided in the 2015 strategic defence and security review whether or not to bring into operation the second carrier, HMS Prince of Wales.

Philip Hollobone: Given the recent increase in its centrifuge capability, and that there is no plausible use for the amount of uranium it has enriched to 20% and beyond, how close does my right hon. Friend feel that Iran is to developing a nuclear warhead that is ballistically deliverable to either Tel Aviv or Riyadh?

Philip Hammond: I do not want to speculate on how close Iran could be to developing any kind of warhead, but I reassure my hon. Friend that the Government support the process of engagement with the Iranian regime to test whether it is serious when it says that it wants to negotiate with the west.

Mark Pawsey: Given previous failures, the Government are rightfully changing the framework for defence procurement, which generates a £22 billion turnover. Will the Minister confirm that under the new arrangements there will be more opportunities for small businesses to get their fair share of that expenditure?

Philip Dunne: I pay tribute to my hon. Friend’s contribution in the Defence Reform Bill Committee. He has consistently championed the role of small businesses in defence procurement—something that the Government wish to take forward. Tomorrow, I will chair the SME forum at the Centre for Defence Enterprise in Harwell, and I will be picking up on those points.

Several hon. Members: rose—

Mr Speaker: Order. I am sorry to disappoint colleagues but as usual demand has outstripped supply.

Mohammed Ahmed Mohamed

Theresa May: With permission, Mr Speaker, I would like to make a statement on the abscond of an individual subject to a terrorism prevention and investigation measure, or TPIM. The Metropolitan police believe that on Friday 1 November, TPIM subject Mohammed Ahmed Mohamed absconded from his controls. He was last seen at 3.15 pm inside a mosque in Acton. The police counter-terrorism command immediately launched an intensive covert operation to trace Mohamed, and inquiries continue. Ports and borders were notified with his photograph, and details were circulated nationally and internationally.
	Acting on police advice, on Saturday I applied to the High Court for an order protecting Mohamed’s anonymity to be lifted, in order to assist the police with their investigation. Last night, the police appealed for the public’s help in tracing him. The police have urged anyone who sees Mohamed or knows of his whereabouts not to approach him but to call 999 or contact the anti-terrorist hotline.
	The police and Security Service have confirmed that they do not believe Mohamed poses a direct threat to the public in the UK. The reason he was put on a TPIM in the first place was to prevent his travelling to support terrorism overseas.
	I have spoken several times over the weekend to the director general of the Security Service, Andrew Parker, and to the Metropolitan police assistant commissioner for specialist operations, Cressida Dick. I received another briefing earlier today. They have told me that they believe they have all the resources and support they need to carry out the manhunt. However, I will not hesitate to provide them with any additional assistance they require.
	The whole House will join me in thanking the police and the Security Service for their continued efforts to keep our country safe. Their focus is to locate and arrest Mr Mohamed. They are doing everything in their power to apprehend him as quickly as possible. The Government will provide them with all the support they need. I commend this statement to the House.

Yvette Cooper: Parliament will be deeply concerned about the Home Secretary’s statement. Obviously, all hon. Members want the police and the Security Service to have all possible help to apprehend Mohammed Ahmed Mohamed as soon as possible. The Home Secretary says that Mr Mohamed poses no direct threat, even though he is widely reported in the media to have attended terror training camps, procured weapons and planned attacks. He has walked away from a terror suspect order in a very simple disguise, and the Home Secretary has no idea where he is. He is the second man in 10 months who has absconded while subject to a TPIM. There were only 10 such men to begin with, and two have now gone: one in a black cab and one in a disguise. The Opposition called for controls to be tightened, for the legislation to be revisited and for lessons to be learned. None of that has happened. The Home Secretary has done nothing.
	Since control orders were strengthened some years ago, no one absconded—since 2007. Lord Carlile, the former counter-terror reviewer, has said:
	“nobody absconded while subject to a relocation order”.—[Official Report, House of Lords, 8 January 2013; Vol. 742, c. 20.]
	However, since the Home Secretary got rid of relocation orders and control orders and introduced the weaker TPIMs, two terror suspects have vanished. Ibrahim Magag was previously relocated to the west country. The Home Secretary’s decision brought him back, and he disappeared. Mohammed Ahmed Mohamed was previously relocated outside London. The Home Secretary’s decision brought him back and he, too, has disappeared. Her policies brought those two terror suspects back into contact with their old networks and with people who could help them to disappear, and made it easier for them to run off.
	Last time the Home Secretary said there was plenty of money for the added surveillance needed, so was Mr Mohamed under active surveillance when he entered the mosque, or was it just ordinary CCTV? His case was in court on Friday—he was accused of tampering with his tag—but why did the Government drop the case? Were the tags faulty? Were there other charges?
	The Home Secretary said that Mr Mohamed was under a TPIM to stop him travelling overseas. What did she plan to do next year when his and all the other TPIMs ran out?
	TPIMs apply to a very small number of difficult cases. Everyone recognises that there is no perfect answer and that there will always be challenges, but this Home Secretary has made it easier for serious terror suspects to disappear. That is irresponsible. She was warned about changing the law and weakening controls. She was warned that more people would abscond and they have done so—twice—but still she will not act. The question on everyone’s lips is: how many more warnings does the Home Secretary need?

Theresa May: This is a serious issue, but the right hon. Lady’s response was beneath somebody who is supposed to understand these matters.
	The right hon. Lady referred to the money available for surveillance. I understand that she briefed Sky News this morning that she would tell the House of Commons that there have been cuts to the funding for monitoring and surveillance. I notice that she has dropped that from her argument, because the truth, as she well knows, is that as part of the TPIM package the Government introduced in 2011 we did not cut the surveillance budget for the police and Security Service but increased it—by tens of millions of pounds per year. We did not cut the budgets for counter-terrorism, policing and the security service; we protected them.
	The right hon. Lady asked about the lessons learned from the Magag case. I can confirm that there was a review of that case, which was shared with David Anderson, the independent reviewer of terrorism legislation, who mentioned it in his annual review. All the recommendations of that review have been acted on. I can also confirm that a similar review will be conducted of this case.
	The right hon. Lady referred to the changes in TPIMs. They are, of course, time-limited, but time limits have nothing to do with this case, as the subject was still bound by the terms of his TPIM. What she never tells
	the House when she makes this point is that 43 people who were subject to control orders have now exited those control orders. The truth is that even before time-limited TPIMs were introduced, the courts would not allow people to be left permanently on control orders. When the Metropolitan Police Commissioner was asked whether he had concerns about time limits, he said:
	“I do not think so.”

Yvette Cooper: What about relocations?

Theresa May: I will come on to the relocations.
	The right hon. Lady talked about tagging. GPS tags are used to provide information on the location of TPIM subjects and the tags that are used for TPIMs are significantly better than the ones they replaced, which had no ability to track subjects outside their homes. In this case, the police believe that the tag functioned exactly as it should have done, but it will be one of the aspects considered as part of the review of the case, and I should tell the House that I have been advised that this abscond does not raise any new operational issues with the tags.
	The right hon. Lady also talked about relocation, but she knows that if someone is determined to break the terms of their TPIM or control order, there is little to stop them doing so in one place or another. David Anderson, the independent reviewer of terrorism legislation, says:
	“The only sure way to prevent absconding is to lock people up in a high security prison.”
	Unless the right hon. Lady is proposing the introduction of such draconian laws—and I thought she had conceded long ago that 90 days was too long—she should accept what David Anderson says. There will always be the risk of an abscond.
	The shadow Home Secretary talked about the control order regime as though it never allowed any absconding by its subjects, but during the six years that control orders existed, there were seven absconds and only one of those seven people was ever found again. The idea that somehow control orders prevented absconds is not true. Even if we wanted to go back to the days of control orders, we would not be able to do so. The powers available under control orders were being steadily eroded by the courts, and the system was becoming unviable. Unlike control orders, TPIMs have been upheld consistently by the courts, so we now have a strong and sustainable legal framework to handle terror suspects.
	The police and security service have always said that there has been no substantial increase in overall risk since the introduction of TPIMs, and despite the implication of what the right hon. Lady said, we have increased by tens of millions of pounds the annual budget for surveillance by the police and security service—and we have also given them new powers. In April this year, in a written statement, I explained how we would use the royal prerogative to remove passports from British nationals whom we want to prevent from travelling abroad to take part in extremist activity, terrorism training or other fighting. That power has already been used on several occasions since it was introduced. As for foreign nationals, the Immigration Bill will make it easier for us to get them out of the country, By the way, the Opposition failed to vote for that Bill on Second Reading.
	The idea that under this Government the police and Security Service have fewer powers to keep us safe is just wrong. The idea that they have less money to keep us safe is wrong. The right hon. Lady should take her responsibilities seriously and support the police and Security Service in the important work that they do.

Angie Bray: Acton is a diverse community. It is also, overwhelmingly, a peaceful and law-abiding community. At its centre sits a mosque well known for being moderate, mainstream and popular. However, I am aware of concerns about potential radicalisation of younger members of the community. Will my right hon. Friend tell me whether her Department had previous concerns about the An-Noor Masjid and Community centre, from which this young man was able to escape?

Theresa May: This is an issue to which my hon. Friend has paid much attention in her constituency. I understand that the mosque authorities have been co-operating with the police and we welcome that co-operation. She refers to radicalisation. Within our counter-terrorism strategy we have the Prevent strand, which is precisely to ensure that young people and others do not find themselves being radicalised, and that we can exercise interventions, particularly through the Channel programme, to help to stop that radicalisation taking place. As I said in relation to the mosque where this individual was last sighted, I am pleased that the mosque authorities have been co-operating with the police.

Jack Straw: In the light of no abscondings under control orders in the five years from 2007 after they were strengthened, but two abscondings in the past 10 months since TPIMs, which the Home Secretary introduced, greatly weakened the controls on these individuals, does she not think that a little contrition rather than bombast would be appropriate in these circumstances? Does she not recognise that the fundamental responsibility of any Home Secretary is to take proper measures to protect the safety and security of the British people? She has failed to do so by acting irresponsibly in weakening the powers available to control terrorists.

Theresa May: May I first say to the right hon. Gentleman that this is my first opportunity in the Chamber to note that he has announced his retirement from politics? He has given many years of service to this House, to his constituents and to the Government in various roles. I am sure there are many people who will be sorry to see him go from this Chamber.
	National security is always the Government’s first priority. The right hon. Gentleman quoted some figures. I have to say to him that, yes, there have been two absconds in the two years that TPIMs have been in place, but there were seven absconds in six years under control orders. As I made clear in my response to the shadow Home Secretary, the control order regime was gradually being eroded by the courts. What we now have under TPIMs is a legally supported regime that puts measures in place to control and provide for those individuals whom we cannot prosecute, but who present a risk. The best place for any individual who is a terrorist is behind bars.

Gerald Howarth: May I commend my right hon. Friend’s approach and urge her to go further in her robustness and scrap the Labour-introduced Human Rights Act 1998? While she is at it, will she follow the advice of our right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) and have the burqa banned in this country? It is alien to our culture and has enabled this man to abscond.

Theresa May: I thank my hon. Friend. He and I, as Conservative Members, both stood on a manifesto at the general election to scrap the Human Rights Act. I expect to stand on that manifesto at the next general election; it will be a Conservative commitment. He asks about the burqa. I will repeat my position, which is one that I have made clear on previous occasions. First, I believe it is the right of a woman to choose how she dresses. We should allow women to be free to make that choice for themselves. There will be circumstances when it is right to ask for a veil to be removed—for example, at border security or perhaps in courts—and individual institutions, like schools, will make their own policies on dress. However, I fundamentally believe it is the right of a woman to be free to decide how to dress.

Keith Vaz: I welcome what the Home Secretary has said about the burqa. This is not a case where the burqa is responsible. I urge her to look at the role of G4S and the tags that have been provided. As she knows, last week a number of cases were dropped after the police found out that there was a suggestion that tags had been tampered with; in fact, it was a question of wear and tear. Will she please investigate this again, rather than just accept that assurance? Was Mr Mohammed Ahmed Mohamed a British citizen? If he was, when did he acquire citizenship, bearing in mind the fact that he was a support of al-Shabaab, and does she have his passport?

Theresa May: On the last points, Mohammed Ahmed Mohamed is indeed a British citizen. I do not have his passport, but the police do. I know the right hon. Gentleman raised the same issue over the Magag case. On tags, as I said earlier, the police believe that, in this case, the tag functioned exactly as it should have done. He referred to the court case. The issue there was not about the effectiveness of the tags, but about reaching the evidence threshold for taking a criminal prosecution in relation to the operation of the tag.[Official Report, 6 November 2013, Vol. 570, c. 1MC.]

Julian Huppert: I agree completely with the Home Secretary that people who have committed terrorism offences should be convicted and in jail. Does she agree, however, that to have forcible relocation for people not convicted of any offence is not only a bad idea, but deeply un-British?

Theresa May: As my hon. Friend knows, the TPIM legislation did not contain relocation provisions. As I indicated in a couple of earlier responses, gradually, over time, the courts were reducing the ability to use various measures within the control orders, and they made it clear that they were not orders on which people should be left indefinitely.

David Winnick: Can we work on the reasonable assumption that the Home Secretary’s spin doctors will not shortly be telling us
	that this happened because of that wicked man Edward Snowden or that somehow
	The Guardian
	was responsible for what occurred?

Theresa May: No.

David Ruffley: My right hon. Friend has protected surveillance budgets since she came into office and was the first Home Secretary to deport Abu Qatada. In short, she is a commendably tough Home Secretary. Will she allow me to say that as a result of those things, Government Members can trust her to find out what went on in this case and that we have 100% confidence in how she is running the show?

Theresa May: I am grateful to my hon. Friend for his remarks. As I indicated earlier, there will be a review of the operation of this case, as there was in relation to Ibrahim Magag, and any lessons that need to be learned will be.

Hazel Blears: This year, 12 people previously convicted under terrorism legislation will be released and on our streets. Early next year, the orders of many of those still on TPIMs will come to an end. The independent reviewer of terrorism legislation, David Anderson, has said it is
	“tempting, in the most serious cases, to wish for longer”
	than the two years under TPIMs, and has described those whose orders will expire as at
	“the highest end of seriousness”.
	What steps is the Home Secretary taking to manage the undoubted increase in risk that will result from those on TPIMs who have completed their sentences under terrorism legislation being released and walking our streets?

Theresa May: The right hon. Lady started by referring to people being released, but these were people who had come to the end of their sentence. That is what happens—it happens in the normal course of events—but for individuals who pose a terrorist risk, or who are suspected of posing a terrorist risk, the law enforcement agencies take appropriate measures to ensure the security and safety of the public. As I said, national security is the Government’s first concern.

Mark Pritchard: I offer the Home Secretary my full support. As she will know, under existing legislation, she has the power to revoke the British citizenship of somebody who holds dual citizenship. May I encourage her to undertake a review of all those in custody and under TPIMs who hold dual citizenship and to consider revoking their British citizenship so that we can deport them more freely back to their home countries?

Theresa May: I note the point that my hon. Friend makes. I think I am right in saying that the majority of individuals who are under TPIMs are British nationals. He is right to say that it is possible to revoke the British citizenship of someone who is a dual national, but we would have to ensure that we did not render anyone stateless in so doing. There are a number of people who are subject to TPIMs who are British nationals.

Paul Goggins: With two suspects on the run, no powers of relocation and a number of the current orders due to end early next year, is it now the Home Secretary’s policy to phase out the use of TPIMs?

Theresa May: TPIMs remain on the statute book as a tool that can be used when it is most appropriate to do so. I am sure the right hon. Gentleman and I agree that we would prefer to see anyone who is in any way involved in terrorism being prosecuted, convicted and sent to jail. As David Anderson has said, the only really secure place for someone who is a terrorist is behind bars. TPIMs remain on the statute book as a tool to be used when it is operationally appropriate to do so.

James Clappison: I also offer my full support to my right hon. Friend. Does she agree that we would do well to remember the long saga of detentions, control orders and absconding under the previous Government, following hard on the heels of the introduction of the Human Rights Act 1998, which has made it so difficult to deal with dangerous people in our society? Can we now expect some humility, common sense and realism from those on the Opposition Benches regarding their responsibility for that?

Theresa May: We might expect that, but from everything we have seen today and on previous occasions, I fear that we shall not see much sign of getting it.

Pat McFadden: The Home Secretary has sought to blame the courts for chipping away at the previous regime, but she cannot escape the fact that it was a deliberate decision by her and her Government to increase the freedoms of these terror suspects by granting them access to technology and removing the relocation power. The former independent reviewer of terrorism legislation, Lord Carlile, said today that the lack of a relocation power was
	“always going to be a vulnerability in the way TPIMs operate”.
	In the wake of this latest absconsion, will she now reconsider the sunset clause in relation to the remaining TPIMs? If not, will she acknowledge that, as a result of a deliberate political decision by her Government, the rest of the suspects will be released on to the streets without supervision in a few months’ time?

Theresa May: I will make two comments in response to the right hon. Gentleman’s question. First, he knows full well that when TPIMs were introduced, this Government increased the funding available to the police and the Security Service for surveillance to the tune of tens of millions of pounds a year. I pointed this out in an earlier response to the shadow Home Secretary. Secondly, he referred to time limits but, as I have said, 43 people were on control orders and all of them have now exited those controls.

Michael Ellis: Will my right hon. Friend confirm that, under her leadership of the Home Office, despite the difficult times of austerity that we inherited from the previous Government, the funding in this area has increased, not decreased, as was suggested in duff information given to the media earlier? Will she also confirm that in May 2007, the then Labour
	Home Secretary had to come to the Chamber to explain why three men had escaped while under the control orders regime of the previous failed Government?

Theresa May: My hon. Friend has got his facts absolutely correct about those who absconded while under control orders. We have protected the funding for counter-terrorism policing and increased the funding for surveillance and other measures as part of the package relating to the introduction of TPIMs. As I said, that involves tens of millions of pounds a year.

Jeremy Corbyn: I should like to take the Secretary of State back to the answer she gave to the hon. Member for Cambridge (Dr Huppert). What convictions have been obtained against Mohammed Ahmed Mohamed? What prosecutions are planned? Does she not think that there is something deeply dangerous about using the royal prerogative to bypass Parliament in order to take away someone’s nationality or access to a passport? Should not an element of accountability be essential in any democratic liberal society such as ours?

Theresa May: For those who are under TPIMs, and others, we make every effort to ensure that prosecutions take place whenever possible. I commend the Security Service in this regard. A number of individuals were prosecuted earlier this year for terrorism-related offences relating to significant plots. This shows the very good work that the police and the Security Service do on a daily basis to keep the public safe. I believe that it is appropriate to have slightly changed the ruling in relation to the interpretation of the exercise of the royal prerogative. It is important to have that measure available; and, as the hon. Gentleman will see from the fact that I am here at the Dispatch Box answering his question, I am also accountable to this House.

Ben Wallace: Unlike the shadow Home Secretary, I have actually taken part in surveillance operations, and it is incredibly hard to watch someone 100% of the time. To come here and try to blame the Home Secretary for what is probably an operational front-line challenge is to play politics with our forces of law and order. Does the Home Secretary agree that one way to improve the capability of our Security Service and police force—to improve surveillance or to get more convictions—would be to introduce the communications data Bill which Labour opposes and our coalition partners block?

Theresa May: I commend my hon. Friend for bringing his personal experience to the debate; he has more experience of participating in surveillance operations than I do. He is absolutely right that we ask our Security Service and law enforcement agencies to undertake difficult tasks and that they do an excellent job for us on a day-by-day basis; they are not, I think, often enough praised for the work they do. My hon. Friend is also right about the importance of communications data. I have been clear on many occasions, including in this Chamber, that I believe we need to increase the ability of our law enforcement and security and intelligence agencies to access the data that will enable them to investigate—but, crucially, in many cases, also to prosecute —those involved in terrorism and organised crime.

Stephen McCabe: The Home Secretary told us at the time of Ibrahim Magag’s escape that the security and surveillance elements of the TPIMs were specific to each individual package and subject to regular review. Is she in a position to tell us when the arrangements covering this individual were last reviewed?

Theresa May: The money made available both to the police and the Security Service was made available around the TPIMs package, and obviously there are a number of ways in which that funding will have been used to enhance their capabilities. As to the individuals under TPIMs, there are regular reviews of the nature of the measures attached to them. As I said, those reviews take place regularly and for every subject of a TPIM.

David Nuttall: I thank the Home Secretary for her statement. Will she explain what action will be taken against Mr Mohamed to protect the public if he is caught?

Theresa May: When Mr Mohamed is caught, as I hope he will be, he will of course be guilty of a breach of his TPIM order, and I would expect appropriate prosecution to follow.

Kevin Brennan: Would not the difficult job of keeping up surveillance on these nine individuals who are subject to TPIMs be made easier if relocation orders were made available? Does the Home Secretary not understand that the British people would expect her at least to review these procedures in the light of the fact that all it seems necessary to do to evade them is either to hail a black cab or dress up in a burqa?

Theresa May: I have made it absolutely clear that all the measures relating to individuals under TPIMs are regularly reviewed to ensure that they continue to be appropriate. We have made more funding available to the police and to the Security Service when the TPIMs were introduced—and that funding continues to the tune of extra tens of millions of pounds a year—to enhance their capabilities for dealing with these subjects. I remind the hon. Gentleman, furthermore, that the police and security services have to deal with a number of individuals, not simply those involved in TPIMs, and we saw some good prosecutions earlier this year of those who were involved in plots to cause significant harm to British citizens.

Christopher Pincher: My right hon. Friend is quite right to point out that Labour’s control orders were failing. Their powers were being eroded by the courts and there were seven absconsions in six years. Further to the question from my hon. Friend the Member for Bury North (Mr Nuttall), will she say what might happen to those who may be assisting Mr Mohamed at the moment?

Theresa May: When it is possible to take criminal action against people who have been involved in criminal offences, we will expect appropriate action to be taken through prosecutions. As I have said this afternoon and on a number of other occasions, I believe that the best place for those who are involved in terrorism is behind bars.

Angela Smith: Can the Home Secretary confirm that Mr Mohamed was previously relocated outside London?

Theresa May: I am not in a position to comment on the individual aspects of the case, and I do not think the hon. Lady would expect me to do so.

Graham Evans: Labour is the party of ID cards, dodgy dossiers and 90 days of detention without trial. Why would anyone heed Labour Members’ advice on security and the rule of law?

Theresa May: I thank my hon. Friend for reminding us of those facts. I believe that the very first Bill introduced by the present Government was the Bill to abolish the ID card scheme that the previous Government had introduced, and I am pleased to say that it was this Government who reduced the period of pre-charge detention from 28 days to 14—although, as my hon. Friend has reminded us, the last Labour Government discussed increasing it to as much as 90 days.

Several hon. Members: rose—

Mr Speaker: Order. I listened patiently to the hon. Member for Weaver Vale (Graham Evans), but it was difficult to detect anything in his scripted question that appertained to the policy of the Government. I have exercised my natural tolerance on this occasion, but I trust that the hon. Gentleman will not push his luck in future. Questions must be about the policies of the Government, not those of the Opposition.

Nicholas Dakin: How many people under TPIMs does the Home Secretary need to lose before she reviews the policy of relocation?

Theresa May: The hon. Gentleman should bear in mind what I said earlier, which was a statement of fact: that over the years, the courts were beginning to erode the control orders that his party had introduced. We responded to that with a package of TPIMs legislation, and, crucially, by giving extra funding to our law enforcement and security services to help them do their job of keeping the public safe.

Bob Stewart: The Human Rights Act seems to give succour to some terrorists. Is it not about time that we replaced it with a British Bill of Rights, which would probably protect our citizens much better?

Theresa May: As I have already made clear, I think that we should indeed consider replacing the Human Rights Act with a British Bill of Rights, and the Conservatives will take that policy to the next election. Meanwhile, I am taking the action that I can take to make it easier for us to deport foreign criminals in particular, and to ensure that certain aspects of the interpretation of the European convention on human rights reflect the will of this Parliament. As we know, this Parliament is on the people’s side, and that is where the law, and its interpretation, should be as well.

Tom Blenkinsop: When did the Home Secretary know that Mohammed Ahmed Mohamed had become a British citizen, and when did she become aware of his terrorist activities?

Theresa May: I looked at the issue of the individual’s terrorist activities when the TPIM was placed on him. I do not have the information about when he became a British citizen in my mind at this moment, but I shall be happy to write to the hon. Gentleman and the Chairman of the Select Committee.

Stephen Phillips: My right hon. Friend said that the case would be submitted to the independent reviewer. Can she give us some idea of how long she expects him to take to make recommendations? Consistent with the robust position that she always takes in protecting the people of this country, can she confirm that, if necessary, she will announce further measures to the House to ensure that terrorists who cannot be prosecuted are dealt with properly and the public are protected?

Theresa May: As I said earlier, national security and the protection of the public are always at the forefront of the Government’s mind when we are considering these issues.
	I am grateful to my hon. and learned Friend for enabling me to clarify something that I said earlier, which his question suggests may have led to some misunderstanding. The review in the case of Ibrahim Magag was undertaken by the Home Office, but it was overseen by the independent reviewer of terrorism legislation. It is not in his remit actually to review, but he looked at the Home Office review and said that it was thorough, and I expect him to look at the review that will be undertaken in this case as well.

Chris Bryant: To be honest, it is not that easy to balance the conflicting interests of security and individual liberty and freedom, but what really worries me about the attitude the Home Secretary has presented today is that she seems to think that these two men came up with some phenomenally cunning plan. One of them jumped in a black cab and the other slipped on a burqa. Surely she understands that the others will probably be laughing in her face.

Theresa May: Obviously, there are a number of operational issues that will be looked at when we review this case, but I am not really sure what question the hon. Gentleman was asking; I do not think there was a question at all.

Peter Bone: In August 2011 the Home Secretary told Parliament in an oral statement that she was going to change the law relating to face coverings. If that had happened—or, indeed, if the Bill of my hon. Friend the Member for Kettering (Mr Hollobone) banning face coverings in public had been introduced—she would not have had to come to the House today. Has she changed her mind on that policy?

Theresa May: We did indeed consult on the issue of face coverings, but that was about not the wearing of the burqa but the powers available to the police in circumstances
	such as mass demonstrations and riots where people are covering their faces, and whether the police needed any further powers. The police were clear that the powers available to them were sufficient for them to be able to deal with such circumstances in future, which is why we did not bring forward any legislation on that matter.

Huw Irranca-Davies: I commend the Home Secretary in at least one respect today: her generous words for my right hon. Friend the Member for Blackburn (Mr Straw) may cause him to pause and think that perhaps he will not depart this place, but will instead stand again. However, in light of there having been two absconders within 10 months, should the Home Secretary not consider whether the measures she has put in place might be improved?

Theresa May: I am clear that we have the TPIM legislation on the statute book, and that it will be used when it is considered operationally appropriate for it to be used. The range of measures that will be applicable to an individual will be considered on a case-by-case basis.

Philip Hollobone: Given that the burqa is mediaeval, sexist and oppressive and given that, as we now know, it represents the easiest and most complete disguise for a Muslim terrorist suspect, will the Secretary of State reconsider her opposition to my Face Coverings (Prohibition) Bill? May I also say to her that this is not about telling women what to wear: first, because we now know that men wear burqas as well as women; and secondly, because this issue is about somebody concealing their identity, and such a law must cover both balaclavas and burqas?

Theresa May: Despite my hon. Friend’s best efforts, my position on this issue has not changed in the last half-hour. I continue to believe in relation to the burqa and niqab that it is for an individual woman to decide how they choose to dress. They should be free to make that choice for themselves. There will be circumstances in which it is appropriate to require somebody to remove a face covering: that could be in court, as we have seen in a number of instances; it could be at the border, for security purposes; and individual institutions such as schools should make their own policy in relation to dress that they consider appropriate in their institution. I continue to hold the view that it is not for the Government to tell women how to dress.

Mr Speaker: Order. None of us wishes unduly to embarrass the right hon. Member for Blackburn (Mr Straw), but following the Home Secretary’s most gracious tribute to him, may I say—on behalf, I think, of Members throughout the House—that the way in which, after 30 years of uninterrupted service on the Front Bench, the right hon. Gentleman has shown his continuing respect for Parliament and enjoyed something of a Back-Bench renaissance over the last three years is hugely respected in all parts of the Chamber?

Points of Order

Jack Straw: On a point of order, Mr Speaker. May I thank the right hon. Lady, the Home Secretary, for her generous remarks, and you, Mr Speaker, and just say that I am not dead yet?

Mr Speaker: I think we are clear on that point now, even if we were not before.

Peter Bone: On a point of order, Mr Speaker. When the right hon. Member for Blackburn (Mr Straw) was Justice Secretary, he had the kindness to ring me early one morning to say that he was making an oral statement about putting Wellingborough prison out to market testing. Unfortunately, under this Government the prison was closed and I learnt about it in a radio programme. I have today, Sir, learnt by letter that they are now selling it off. Would it not have been a courtesy to this House for them to have made a statement?

Mr Speaker: I am rather perturbed to learn what the hon. Gentleman has just said. As he knows, the decision on whether or not to make statements is in the hands of Ministers. Ordinarily, certain courtesies obtain in dealings between colleagues, including, most notably, between those who hold Executive power and Back- Bench Members in whose constituencies particular important decisions are contemplated or made. I do not think I can go further than that today, but knowing just what a thoroughly —I hate to use this word in the light of his surname—dogged individual he is, I feel sure that
	Mr Bone will raise the matter, either at his own behest or on the advice of Mrs Bone, before very long.

Alison McGovern: On a point of order, Mr Speaker. Last week, I received a very short answer to three detailed questions I had tabled about the access to elected office for disabled people fund, which exists to help improve the diversity of this place. Never mind answers, I barely received an acknowledgement that there were, in fact, questions tabled. May I seek your advice on how to get answers to these questions, especially as this is an important matter concerning the diversity and make-up of this House?

Mr Speaker: I am very grateful to the hon. Lady for her point of order. I am well aware of that £2.6 million fund, about which I was speaking in Edinburgh on Friday. If memory serves me correctly, the fund is a follow-through from the recommendations of the Speaker’s Conference which concluded in February 2010. The matter is indeed of the utmost importance, so I am disappointed if she has received less than substantive responses. The general principle here, as the Deputy Leader of the House, who is on the Treasury Bench, will know, is that ministerial replies to questions should be both timely and substantive. If they are heavily delayed, that is a discourtesy. If they are “insubstantive” or insubstantial, whether delayed or not, that is not serving the House. Members look for a response that is as comprehensive as possible and informative. If the hon. Lady has not achieved that so far, I hope that the Deputy Leader of the House may be willing, in Parliament’s interest, to assist her in her endeavours. If she has to go through the Table Office again to probe further, I do not think she will require any additional encouragement from me.

National Insurance Contributions Bill

Second Reading

David Gauke: I beg to move, That the Bill be now read a Second time.
	The Bill underlines this Government’s belief that pro-business policies help growth and job creation. For too long, our economy has been dependent on a booming financial services sector, on the one hand, and unsustainable levels of public spending, on the other. That made us particularly vulnerable to the crisis of 2007-08, the consequences of which continue to be felt today.
	The challenge the Government faced in 2010 was how to begin the process of getting our public finances in order and to put in place the conditions for growth. Some believed that it was not possible to do both and some argued that measures to reduce the deficit would result in higher levels of unemployment. It was the Leader of the Opposition, no less, who said that the Government clearly had
	“a programme that will lead to the disappearance of one million jobs”.
	That was just over three years ago and there are now more people in work than ever before.
	Since the coalition came to power, employment has increased by more than 1 million and there are 1.4 million private sector jobs, more than there were at the time of the last election. Employment in the three months until August 2013 was at its highest ever level, at 29.87 million. Those predicting disaster massively underestimated the capability of businesses up and down the country to adapt, innovate and expand, but they also failed to appreciate that we now had in place a Government on the side of businesses who were willing to put in place the conditions that help them to invest and expand, whether by addressing burdensome regulations or reforming our tax system.
	In case we forget, such action included reversing the worst effects of the previous Government’s jobs tax. Yes, at a time when we needed businesses more than ever to take on more staff, Labour’s contribution to deficit reduction consisted of increasing the tax on jobs.

John Redwood: Does my hon. Friend think that it is possibly because they are embarrassed by that record that there are only two Labour Back Benchers in the whole Chamber and nobody from the other Opposition parties? How many extra jobs does he think his excellent Bill might help to create?

David Gauke: My right hon. Friend makes a very good observation. I can rarely remember so few Labour Members being present for the opening of a Second Reading debate. I was beginning to take it personally, but he has reassured me that this issue does not attract the interest of the Opposition. Labour is the party that intended to increase the jobs tax. Pretty much the only measure that they had for deficit reduction was to increase employers’ national insurance contributions, which was not a sensible approach at all.
	We are not predicting how many jobs the Bill might create because a number of factors apply. It is interesting to note, however, that the Federation of Small Businesses believes that the measure is better than the one that it had advocated, which it anticipated would have created 45,000 new jobs. It has carried out a survey of its members and 28% of respondents believed that this measure would help them to increase the number of people they employ. That is a very encouraging step.

Guy Opperman: I accept entirely that the Minister cannot give specifics on the number of jobs the Bill will create, although quite evidently it will create jobs. Can he estimate how many employers he expects it to assist, particularly in the north-east?

David Gauke: That is a similar point, and, as I say, I am nervous about giving precise numbers. Of the FSB respondents, 28% believed that this would help them. We believe that we have to consider a range of measures, but clearly measures that reduce the cost of taking on staff must help in increasing employment. For example, the Bill would enable a business to take on four people on the national minimum wage and not pay any employers’ national insurance contributions at all. That will clearly help.

Margot James: My hon. Friend mentions the welcome for this Bill from the FSB. Is he aware that charities and social enterprises will also benefit from it? Alex Swallow, chief executive of the Small Charities Coalition, said:
	“For a lot of the smallest charities, having one paid member of staff is a big step forward…having this allowance now helps them to do that, so it is a very positive thing.”

David Gauke: I am very grateful to my hon. Friend for that intervention. She makes an important point that applies to both businesses and charities. Taking on the first member of staff can be the most difficult step, as it is a big event for a business. If we are able to help and to reform our tax system to enable businesses or charities to take that member of staff on without paying the jobs tax—employer’s national insurance contributions—that will clearly encourage those businesses, which, I hope, will then take on further staff and expand.

Charlie Elphicke: Will my hon. Friend confirm that the measure was the largest tax cut in the Budget? Does he therefore not think it is all the more surprising that there are no Labour Members here to scrutinise a major plank of that Budget?

David Gauke: Another observation one could make is that there are no Labour Members of Parliament here because they are—[Interruption.] I apologise. That remark is unfair and I withdraw it. There are the Labour Front Benchers and now three Back Benchers. Who knows? We might reach five or six by the end of the debate. Perhaps Labour Members have confidence in, and enthusiasm for, the Bill and can find nothing to criticise. However, we look forward to the speeches to come later. On that note, as the hon. Member for Bolton West (Julie Hilling) has waited so patiently, and as it is about time that we heard from a Labour Member, I give way to her.

Julie Hilling: I thank the Minister for giving way. Has he considered the fact that there are only a few Labour Members here because, to our relief, he has, in the end, listened to what we have been asking for and included a great deal of it in the Bill? I congratulate him on listening to us, and therefore on introducing the Bill.

David Gauke: That, too, is a theory, but I am not sure that it is necessarily persuasive. When we fought the previous general election, the Labour Government’s big policy for deficit reduction, among a pretty thin set of policies, was a big increase in national insurance contributions. We have already reversed the worst effects of that, and the Bill is a further measure that will help businesses up and down the country to create jobs.
	The hon. Member for Bolton West is referring to one element of Labour’s five-point plan, which we do not hear much about any more, but there were serious problems with Labour’s proposal; this one is very different from that. It was a much more targeted scheme aimed at smaller employers taking on new employees, which raised all sorts of practical questions about how to define a new employee and how to prevent there being perverse incentives. I put it to the House that that scheme was neither workable nor likely to achieve its objectives. I suspect that we shall return to that issue.

Christopher Pincher: While the Labour Whips hunt for a seventh dwarf—

Chris Evans: Cheeky!

Christopher Pincher: No, I am definitely Bashful. Cheeky is probably on the other side of the House.
	Does my hon. Friend the Minister agree that the key component—the most important innovation in the proposal—is the fact that it encourages confidence among businesses, particularly small businesses? I held a jobs fair a couple of weeks ago and 500 jobs, part-time and full-time, were available. Many small businesses at the fair thought that cutting their tax through this measure was the right thing to do.

David Gauke: I am grateful to hear of the experience in Tamworth, and my hon. Friend is right to raise that point. Particularly for those small employers taking on their first person, the fact that they do not have to pay employer’s national insurance contributions at 13.8% will help them. In many cases, the Bill will have exactly that effect. I welcome what appears to be broad support for the measure.

Anne-Marie Morris: Following on from the earlier point about confidence, does the Minister agree that, although all the surveys indicate that confidence is at an all-time high, the challenge is investment? A Federation of Small Businesses survey has said that the measure will enable 28% of businesses to take on additional staff; that is what businesses want to do. Some 25% of those surveyed would invest in new machinery and equipment, and 21% in new staff training. That is exactly what we need; we need to turn confidence into a deliverable result.

David Gauke: My hon. Friend raises an important point. I pay tribute to the work that she does on the all-party parliamentary group on micro-businesses. She provides
	a very strong voice in the House for smaller businesses, and she is absolutely right to do so. She is right to draw the House’s attention to the FSB survey. We have already talked about the contribution that the measure will make to the taking on of more staff, but where more staff are not taken on, there will very often be investment in the business, which will clearly help it to expand.
	The Bill cuts the jobs tax for 1.25 million employers and takes 450,000 of them out of employers’ national insurance contributions altogether, making it less expensive for businesses to take on new staff, so the Bill will help job creation. It contains four main measures. We have touched on the employment allowance. I will also say something this afternoon about the fact that the Bill gives effect to the general anti-abuse rule on national insurance contributions. It also amends the Social Security Contributions and Benefits Act 1992 to allow regulations to be made on the certification of non-UK employers of oil and gas workers, and makes changes in connection with two elements of the partnerships review carried out by Her Majesty’s Revenue and Customs. The Bill also makes a small number of technical corrections that I am happy to take the House through, should there be demand for that; if there is not, I am sure that we can cover them in some depth in Committee.
	Returning to the employment allowance, as part of our efforts to remove barriers to growth for businesses and to equip the UK economy to compete in the global race, the Chancellor announced in this year’s Budget the creation of a new employment allowance, as my hon. Friend the Member for Dover (Charlie Elphicke) pointed out. It will take effect from 6 April next year. Businesses, charities and community amateur sports clubs in the UK will be entitled to a £2,000-a-year allowance towards their employer national insurance contribution liability.
	The employment allowance builds on action that the Government have taken to make the tax system more competitive, and to encourage growth. That includes cutting corporation tax, increasing the rate of the research and development tax credit for small and medium-sized enterprises, increasing the annual investment allowance to £250,000, and giving a cash-flow benefit to those who invest in plant and machinery.
	The objective of the employment allowance is to help businesses with the cost of employing their staff by reducing their employer class 1 national insurance contributions bill each year. It will support thousands of small businesses that aspire to grow, perhaps by hiring their first employee or expanding their work force, as well as those already employing others, or facing temporary cash-flow problems.

Jonathan Edwards: In the emergency Budget that followed the last Westminster election, the Treasury said that it wanted to rebalance the economy geographically, but the only measure that we have seen to date is the reduction in employers’ national insurance contributions for companies outside London and the south-east. The employment allowance is a UK-wide measure. Does that indicate that the Treasury has given up on its ambitions geographically to rebalance the UK economy?

David Gauke: No, not at all. There is a whole host of measures, including the regional growth fund, and there is some really good news; exports are up significantly in
	the west midlands and the north-east in particular. We are taking steps to strengthen industries up and down the country. The hon. Gentleman touches on the regional employers’ NICs holiday; let me turn to that, because I suspect that the policy will feature heavily in the arguments that we hear from Opposition Front Benchers.

Brooks Newmark: The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a good point about rebalancing the country’s economy. Is my hon. Friend the Minister aware that we have had the biggest growth in construction in six years? The Chancellor and the Treasury should be congratulated on ensuring that the Government are rebalancing financial services and manufacturing in the economy.

David Gauke: The striking point about the most recent growth numbers is that they demonstrate growth in every sector, and that is very encouraging. I began by saying that the economy in the mid-2000s, say, was very dependent on financial services and on London and the south-east. Of course we want a successful financial services sector and we want London and the south-east to do well, but it is also important that growth is better balanced throughout the United Kingdom, and the Government continue that commitment.

Charlie Elphicke: While hesitating to introduce any controversy into the debate, does my hon. Friend agree that the hikes in the jobs tax under the previous Government destroyed jobs, and that this Government’s policy of reducing the jobs tax, particularly in this Bill, will enhance job creation and aid the recovery?

David Gauke: I do agree. Given that we want to increase employment, it would not have been sensible to undertake the increase in national insurance contributions that the previous Government intended. That was clearly a mistake. I am sure that my hon. Friend will be delighted to know that not only are he and I in agreement but Tony Blair said last week that he thought it was a mistake.

Sheila Gilmore: rose—

David Gauke: Whether all four of us will agree, I wait impatiently to find out.

Sheila Gilmore: Can the Minister explain how a measure that was not actually implemented destroyed jobs, as the hon. Member for Dover (Charlie Elphicke) suggested?

David Gauke: To have implemented the policy we inherited would have destroyed jobs. It did not do businesses in the United Kingdom any good to have the prospect of an increase, sending the wrong message that we were going in the wrong direction. I am pleased to say that we have reversed that direction of travel by not implementing the previous Government’s policy in full. We have increased thresholds for national insurance contributions, which has clearly helped. Now, through this Bill, we are providing an employment allowance of £2,000.

Margot James: Does my hon. Friend agree that the reason the previous Government proposed the ridiculous increase in the jobs tax was testimony to the fact that
	they could not countenance cutting public expenditure? That was their downfall. They were content to continue to borrow £1 for every £4 this country was spending, and their proposal was evidence of a wholesale mismanagement of the economy.

David Gauke: My hon. Friend makes a valuable point that is well worth highlighting. When running a deficit of the size that we were running, we face some tough decisions. We have taken a range of measures to reduce the deficit, and it has reduced by a third.
	Ultimately, though, whoever was in government was going to have to take these difficult decisions. If we are not prepared to take difficult decisions on spending—there is no evidence that Labour Members would do so—the answer is that we have to increase taxes. When we look around to see what taxes are available, it is clear that some very difficult decisions have to be made. Labour Members chose to go for employers’ national insurance contributions; perhaps they considered that that option was less visible to the general public than some of the others. However, the consequences would have been higher unemployment, and this Government were not prepared to face that.

Edward Leigh: What business hates more than anything else is the complexity of the tax system. We still have one of the longest tax codes and one of the most complex tax systems in the world. Will the Minister explain how we are still setting about our long-term objective of simplifying the tax system and achieving a much flatter rate of tax for the sake of business?

David Gauke: The Bill will result in a big simplification for 450,000 businesses, because they will no longer have to pay any employers’ national insurance contributions. That is significant progress. We have established the Office of Tax Simplification, which has produced a number of reports. Anyone who has studied recent Finance Acts closely will have seen that a whole range of measures have been introduced as a consequence of the OTS’s recommendations. Of course, there is more work to be done and we as a Government remain committed to that, but there have been a whole range of measures. The OTS is looking at employee benefits at the moment, and that is significant.

Julian Smith: One of the concerns that small businesses had about the national insurance holiday—which was an excellent policy, despite the Opposition’s comments—was about the forms that had to be filled in to qualify. Will the Minister clarify how easy it will be for businesses to take advantage of the new proposal?

David Gauke: My hon. Friend makes a good point. I want to turn to the employers’ national insurance contributions holiday, because I suspect it will feature in the speeches of Opposition Members. They will make the point that take-up was not as high as we had anticipated. [Interruption.] Let me give the numbers: 26,000 employers and 90,000 employees have benefited from it. Our expectation was that take-up would be much higher. [Hon. Members: “How much?”] Don’t worry; I am going to set it out.
	We said that 400,000 businesses and 800,000 employees would benefit from the scheme. I think that the reason why that did not happen is closely aligned to what my hon. Friend has just pointed out: a scheme that was, essentially, quite targeted and required businesses to apply—even though we worked hard to try to make the application process as simple as possible—simply meant that fewer businesses applied for it than we had anticipated. Take-up was lower than expected and there are lessons to be learned from that. We should be open about that.
	We need a system that is simple and that can be applied easily. Under the new proposal, no application process is needed as such. Businesses will receive the benefit of the employment allowance simply by using up-to-date payroll, and the introduction of real-time information makes that much easier to apply. We believe that this is a much-improved policy. It contrasts with the employers’ NICs holiday, because that was a targeted regime. It also contrasts both with the policy advocated by Labour in its five-point plan, which was even more targeted, and with the policy we heard about yesterday on the living wage. Complicated, temporary schemes requiring applications are likely to have disappointing levels of take-up, whereas permanent schemes automated through the payroll system will, we believe, apply much better.

Christopher Leslie: Will the hon. Gentleman give way?

David Gauke: I give way to the hon. Gentleman, whom I congratulate on his elevation to the shadow Cabinet.

Christopher Leslie: I am grateful to the Exchequer Secretary and I also welcome the new additions to the Government Front Bench. He will remember that we both sat on the National Insurance Contributions Bill Committee—I think it was one of his first Bills as a brand new Treasury Minister—and Labour said at the time that the proposal was very complicated. We said that he needed to be very careful with the convoluted regional design that he put in place and that the scheme would not get the anticipated take-up, which evidently it did not. It is sometimes invidious to say these things, but we told you so. Will the Exchequer Secretary go a little bit further, accept that we were right and he was wrong, and be big enough to say sorry?

David Gauke: If I remember correctly, that was in autumn 2010, when the next leader of the Labour party was saying that 1 million jobs would go missing. The hon. Gentleman says that the NICs holiday was too complicated. One of the lessons that can be learned from the NICs holiday is that the simpler the scheme, the better. Perhaps the Labour party has not been listening to him because since that debate, it has proposed two NICs schemes, both of which are more complicated than the one that we had in place. If he is making the case for keeping NICs schemes simple, perhaps he ought to have a word with his party leader.

Margot James: My hon. Friend is being exceedingly generous in giving way. Does he agree that the Opposition’s latest wheeze of giving a subsidy to employers who take on employees at the living wage will have a huge dead-weight
	cost, because 12 months before the appalling prospect of the return of a Labour Government, employers are likely to stop giving salary increases to workers who are on the minimum wage, mindful of the fact that if they give it another year, they might get it all rebated by the taxpayer?

David Gauke: My hon. Friend makes two valuable points, but I detect that you do not want me to dwell on the issue, Madam Deputy Speaker.

Nick de Bois: The Minister has talked about wages. Interestingly, the Federation of Small Businesses has said that about 29% of its members will use the employment allowance to give a pay rise to some of their employees, which they have been unable to do because of the economic circumstances. Does that not show that this policy is a way of delivering sustainable growth and sustainable wages, and not just a gimmick that will do more harm than good?

David Gauke: My hon. Friend is absolutely right. It is worth bearing it in mind that tax plays an important role in the cost of living. If taxes are put up, it increases the pressure on the cost of living. Ultimately, that is where the policies of the Labour party would lead.

Julian Smith: Will the Minister confirm that he will take no lessons from the Labour party, because during the debates on the national insurance contributions holiday, it advocated more bureaucracy in the form of annual reports and the like?

David Gauke: My hon. Friend is right. The policy of providing a NICs break only for new employees raised all sorts of practical questions such as who constituted a new employee and what perverse incentives might have been created. That is not dissimilar to the point that my hon. Friend the Member for Stourbridge (Margot James) has made about Labour’s current policy.
	I will turn to the other elements of the Bill. Clauses 9 and 10 relate to the general anti-abuse rule. The Government announced at last year’s Budget that they accepted the recommendation of the Aaronson report to introduce a GAAR targeted at abusive tax avoidance schemes. The GAAR was introduced in part 5 of the Finance Act 2013 and has been in force since July. This Bill will apply the GAAR to national insurance contributions.
	Clause 11 relates to oil and gas workers. In this year’s Budget, the Chancellor announced that the Government would strengthen the legislation on offshore employment intermediaries. The Bill will address the non-payment of employer’s national insurance contributions in the oil and gas industry through the placement of the employer of oil and gas workers who are working on the UK continental shelf outside the UK. The measure has been subject to consultation. The consultation document, “Offshore employment intermediaries”, was published on 30 May 2013 and the consultation closed on 8 August 2013. The summary of responses was published in October.
	The Government intend to address those offshore employment schemes largely by using existing powers contained in social security legislation. The Bill supplements those with a new certification provision for the oil and gas industry. That provision will apply where the national
	insurance obligations are fulfilled by someone on behalf of the person deemed to be the employer for national insurance purposes.
	Clause 11 is part of a measure that, as a whole, is expected to bring in the region of £100 million per year to the Exchequer, without having a significant economic impact on the oil and gas industry. Staff costs for some businesses may increase if they had not previously been accounting properly for all tax and NICs. There will be little cost to the Government through additional administration, other than HMRC implementing the new certification system, and I hope hon. Members will agree that this is a straightforward and uncontroversial provision.
	Finally, I wish to refer to provisions in the Bill concerning HMRC’s partnership review, which are contained in clauses 12 and 13. Following the Chancellor’s Budget announcement, HMRC carried out a consultation on two aspects of the partnership rules between May and August this year, and the Government are bringing forward measures in the Bill as a result of that review. The Government are proposing two sets of changes, the first of which was not part of the consultation proposals but resulted directly from information received during that consultation. It concerns a tax issue that can arise from the interaction of the alternative investment fund managers directive—AIFMD—and existing partnership tax rules. Only those alternative investment fund managers who operate as a partnership will be affected by the proposed changes in the Bill.
	A provision in the Bill will allow regulations to be made to modify the class 4 NICS liability of partners whose profits will be deferred under AIFMD, which aims to improve investor protection and reduce risk. The regulations will be based on new tax legislation that will be included in the forthcoming finance Bill. Measures will be included in the NICs Bill, the forthcoming finance Bill and secondary legislation to reclassify certain limited liability partnership—or LLP—members as employed earners for tax and national insurance purposes, to tackle the disguising of employment relationships through LLPs.
	The tax and NICs changes are expected to bring in approximately £125 million to the Exchequer in the first year, while the broader economic impact is expected to be negligible. There will be changes to the NICs liability for certain partnerships and individual partners in the alternative investment fund sector. The Bill will also result in some LLPs in certain industry sectors where disguised employment has been most prevalent paying increased amounts of NICs.

Richard Fuller: I greatly appreciate the Minister giving way. Before he sits down, will he or one of his colleagues answer on the financial costs of the employment allowance contained in the Treasury documents? What impact on the take-up of tax credits were included in the estimate of £1.25 billion impact on the Exchequer in 2014 through to £1.7 billion in 2017-18? I do not expect the Minister to have those numbers to hand, but if his colleagues could reply to that later, or send me a note, I would appreciate it.

David Gauke: I am grateful to my hon. Friend for that observation, and we will of course take a cautious estimate on the impact on tax credit take-up. Those numbers
	were signed off by the Office for Budget Responsibility, but I will ensure that my hon. Friend receives an answer on the detailed technical point before long.
	This is an important and necessary Bill. Through the employment allowance it will allow us to support businesses with the cost of employing their staff, as well as small businesses that are aspiring to grow. The Bill also includes a package of measures aimed at activity that attempts to reduce the national insurance contributions payable to the Exchequer—an issue we are seeking to address.
	This is another Bill that will help create a system of low taxation that is properly enforced. It will continue to help businesses help our economic recovery, and it will help jobs and job creation. I commend the Bill wholeheartedly to the House.

Shabana Mahmood: I salute the Minister’s valiant effort to gloss over recent history and his record. I can tell Government Members that the reason their Minister was not making any predictions about the impact of the policy in the Bill was that he got all his previous ones wrong.

Nick de Bois: Given the Opposition’s dreadful predictions about how many jobs would be lost under the Government, does the hon. Lady agree that it would be wise for her to tread carefully on predictions?

Shabana Mahmood: That was a valiant effort to change the subject, but today we are talking about this Minister’s record and the regional national insurance holiday plan. I note that the Minister could not bring himself to admit that the Opposition were right and that he was wrong about that. Perhaps we can return to that point later.
	The Minister sought to focus as much as he could on the employment allowance and desperately tried to forget its predecessor scheme that the Government introduced in their 2010 emergency Budget—the regional national insurance holiday, which was enacted in the National Insurance Contributions Act 2011. The national insurance holiday was an abject failure, so I am not surprised that he wants to pretend it never happened, but it did, and it failed utterly. He has wasted three years clinging to that policy rather than doing what Opposition Members told him to do, which was to rip it up and design a new scheme that took account of the criticisms made by us and others.
	The Bill introduces the employment allowance, which we support, so perhaps we should give the Minister credit for getting there in the end, but it is somewhat difficult to do so, because it has taken him far too long to rectify the flaws of the previous scheme, which we warned him about from the beginning, as my hon. Friend the Member for Nottingham East (Chris Leslie) has reminded him. As a result, businesses desperate for help have struggled in the meantime.
	Those businesses, particularly small and medium-sized enterprises, which are the engine of our economy, have continued to suffer. Bank lending to SMEs is still contracting, and analysis published by the Department for Business, Innovation and Skills shows that tightening credit has disproportionately affected low and average-risk SMEs. Last year, Project Merlin missed its target for
	lending to SMEs by more than £1 billion. In 2010, the Office for Budget Responsibility predicted that lending to businesses would have risen 34% by now, but in fact it has fallen by 10%.
	Given this climate of the past three years, action has been necessary to support business, but, on national insurance, it has taken the Government too long to get there.

Richard Fuller: The hon. Lady is making some fair criticism of the national insurance holiday, but does she agree that one problem with the holiday was that it was a one-off, and that businesses are so smart in their planning that they ignore one-off schemes and go on previous predictions? Does she agree that a steady basis for policy is better than one-off, one-year schemes?

Shabana Mahmood: The hon. Gentleman makes a fair point, but there were many other problems with the national insurance holiday, which I shall return to later.

Ian Swales: As we are having a national insurance history lesson, what does the hon. Lady think the impact would have been of a 1% increase for employers and employees in April 2011?

Shabana Mahmood: I thank the hon. Gentleman for that intervention, but I prefer to look at the record. When the Government came to power, they inherited a growing economy. They choked off the recovery, resulting in three years of flatlining and stagnation, and the current cost-of-living crisis that affects businesses and people up and down the country.

David Rutley: The new version of events on the Government’s legacy is interesting. We received a dismal legacy. We had a huge deficit, but Opposition Members—deficit deniers—cannot recognise that. They should apologise for proposing the jobs tax. Will the hon. Lady apologise for putting that on their policy platform? It was a complete disaster.

Shabana Mahmood: I do not think that an economy that was growing was a bad legacy to leave. The legacy of three wasted years, caused by the Government pursuing a failed economic plan that has delivered a cost-of-living crisis for millions of people, is not one to write home about.

Jonathan Edwards: The key point about the national insurance measure in the emergency Budget was that it was a statement of intent that the UK Government wanted to rebalance the economy geographically. Under the last Labour Government, wealth polarised geographically at an incredible rate. If the hon. Lady is in the Treasury after the next election, what will she and her colleagues do to rebalance the UK economy geographically?

Shabana Mahmood: We have been speaking a great deal about rebalancing the economy and our proposals on regional banking, for example, are proof that we take the issue seriously. The hon. Gentleman described
	this Government’s policy as a statement of intent, but it was an absolute failure, and that is the subject of the debate today.
	The national insurance holiday was a flagship policy of the Government’s first Budget, which is why they are so desperate to forget that it happened. They created a scheme that ran from 6 September 2010 until 5 September 2013 and applied to new businesses only. They were eligible only if they were created after 22 June 2010. Under that scheme, new businesses would not have to pay the first £5,000 in national insurance for each of their first 10 employees during the first year of the business. Greater London, the south-east and the eastern region were all excluded from the scheme. The Government said that 400,000 businesses and some 800,000 employees would benefit from the national insurance holiday, at a cost of £940 million over the three years of the scheme. In their impact assessment, the Government confidently predicted that the average benefit per business would be about £2,000, but by the end of the three years of the national insurance holiday in September this year, the scheme was shown to have been a comprehensive failure.
	In the end, only 25,000 businesses received NICS relief—that is 375,000 fewer businesses being helped than the Government originally claimed. It was always highly unlikely to have ever been worth the maximum £50,000 to a new start-up business. To get the maximum relief available, the new businesses would have had to take on 10 people with salaries of up to £40,000, which does not exactly fit the pattern of how new start-ups behave and the sorts of choices that they make in their first year of business.
	Of the £940 million set aside to pay for the scheme, only £60 million was ultimately paid out, a paltry 6% of the amount originally intended. To put that in context, the Government spent £12 million on the administration of the scheme. We repeatedly warned that the scheme was not working, that it was not helping businesses as intended and that the Government should reform it, expand it, review it or bring forward a new one, but they refused to listen.
	It is not as though the Minister could not see the failure unfolding before his eyes. Take-up of the national insurance holiday was never anything other than dismal. In the first year of the scheme, there was not one month in which HMRC received more than 850 applications. In 2012, there was only one month when the total number of successful applications was more than 1,000—that was in May 2012, when there were 1,130 successful applications. For the Government’s scheme to succeed, they would have needed to hit that number every month for three years, and they got nowhere near that.
	When the Treasury Committee conducted its inquiry into the June 2010 Budget, the Chair of the Committee said:
	“For those of us who have been on the circuit a while it sounds like another case of the triumph of hope over experience.”
	How right he was.

David Mowat: A few moments ago, the shadow Minister was asked a question on regional focus. She has also said that one of the problems with the last scheme was that it did not include the south-east. Is it Labour’s position that the scheme should have applied in the south-east as well?

Shabana Mahmood: The hon. Gentleman is somewhat confused. As was pointed out earlier, we always said that one of the problems with the scheme was the regional element, and I am coming to that point.
	During the passage of the National Insurance Contributions Act 2011, we told the Minister that he should drop the regional condition attached to the national insurance holiday and expand it to areas of the UK that had been excluded. Today, he brings to the House the employment allowance, which does exactly that. In fact, the Government’s analysis, published this morning, shows that more than 40% of the expected total number of employers who will not pay any NICs under the employment allowance are based in regions excluded from the previous scheme. At the time, the Minister said that extending the national insurance holiday across the UK would increase the cost by approximately £600 million to a total of £1.6 billion over three years. Today, his employment allowance is predicted to cost £1.3 billion in the first year, rising to £1.7 billion by 2017-18. We said that the national insurance holiday should be extended to cover all businesses, rather than simply new ones. Today, the Minister is introducing an employment allowance that covers all businesses, not just new businesses.

Richard Fuller: I am delighted to hear the hon. Lady talk about the virtues of expanding reductions in national insurance across the country and extending it in terms of time. Does she therefore think it was wrong for her, in the previous election, to stand on a manifesto that advocated an increase in national insurance?

Shabana Mahmood: I was proud to stand as a Labour candidate at the general election when the economy was starting to grow, but that recovery was choked off by the hon. Gentleman’s Government.
	During the Committee stage of the National Insurance Contributions Act 2011, we tabled amendments to extend the national insurance holiday to charities. The employment allowance will do just that. This is effectively our policy, so we are of course delighted to support the Bill. Since the policy was announced in the Budget, we have been calling for it to be enacted immediately, rather than waiting until April 2014.

David Gauke: I note that the hon. Lady did not respond to the question from my hon. Friend the Member for Bedford (Richard Fuller) on whether she supported the Labour party’s policy of increasing employers’ national insurance contributions. Does she recognise that the Labour party’s policy has been to target the NICs scheme at small businesses—not all businesses, as she said—and only for new employees, not all employees? That substantially complicates the scheme, requires applications and shares many of the complexities of the NICs holiday.

Shabana Mahmood: I thank the Minister for that intervention. I am not surprised he wants to turn the attention away from his own U-turn. I remind him that our proposal was a refinement and an extension of his failed policy. We could see it was failing and, doing our job as a responsible Opposition, we were suggesting ways in which the Minister might be able to rescue his
	failed national insurance holiday. I must correct him: the scheme was not for small businesses only, but all existing businesses.

Julian Smith: This is a highly depressing speech. Should we not all be celebrating the fact that the economy is turning a corner and celebrating this policy, which will encourage the risk-takers, who are pushing the recovery on, to go further and faster and take on more people? This is a depressing speech. Let us get on with the opportunity that this policy brings.

Shabana Mahmood: I am sorry that the hon. Gentleman is so depressed that his Government’s policy has failed, but that is not a matter for me.
	We will seek reassurance from the Government and test the Bill’s provisions to ensure that the new scheme does not suffer from the problems associated with the previous scheme. In particular, we will scrutinise its administration. The national insurance holiday was too complicated and the employment allowance should not suffer from the same problems. One problem affecting take-up of the previous scheme, in addition to its complexity, was the lack of publicity. Many businesses simply did not know what was available. This problem must not be repeated. This is particularly important when it comes to publicising the scheme to charities and amateur sports clubs, to which it now also applies. They are more likely to be unaware of what is available, and the Government should have a clear publicity strategy, subject to review, if take-up is, for whatever reason, lower than expected.
	Clauses 9 and 10 apply the general anti-abuse rule to national insurance contributions, and enable the Treasury to ensure that the GAAR, as it applies to national insurance and to tax, is kept in line.
	We support the application of the GAR to national insurance, but we remain unconvinced that the current version is up to the job. It is the Government’s flagship policy for tackling tax avoidance, and their figures show that it will result in annual revenue of £60 million in 2014-15, which they expect to rise to £85 million by 2017-18, but that compares with a tax gap that was estimated, when the GAR was introduced, to be £32.2 billion but which has now risen to £35 billion. Have the Government thought about reassessing their figures in the light of the slightly over-enthusiastic estimates made for the UK-Swiss tax agreement? Anyway, a dent of £85 million in a tax gap of £35 billion is nothing to write home about.
	The House will recall that two months ago, a member of the GAR independent advisory panel, which decides whether people have broken the rule, was forced to resign, shortly after the GAR came into operation, having been caught advising people at a tax-planning conference how to keep their money
	“out of the Chancellor’s grubby mitts”.
	This was someone who was hand-picked to advise Ministers on the avoidance schemes the GAR should catch. We remain concerned, therefore, that the GAR is far too narrow, that there is no specific penalty regime, that no arrangements are in place to monitor its effectiveness and that, as a result, it has little credibility. We will continue to press these arguments when the Bill reaches Committee.
	We welcome the introduction of a certification scheme for offshore employers of oil and gas workers. The extent of this problem is significant, with at least 100,000 individuals having been found to be employed through an intermediary company with no presence, residence or place of business in the UK. I note that this is the first of three measures aimed at tackling this issue. We await the introduction of the other two by way of secondary legislation and provisions to be included in the Finance Bill. We know from analysis published alongside the Bill, that the changes, as a whole, are expected to result in Exchequer savings of £80 million to £100 million a year, and we will wish to review the effectiveness of these provisions as and when they come into force.

Julian Smith: Does the hon. Lady regret the Labour Government’s failure, over 13 years, to take the anti-tax avoidance measures that this Government are now putting in place?

Shabana Mahmood: I absolutely reject the hon. Gentleman’s point. We have a very good record on tackling tax avoidance, and as I said, at the moment I do not think that the GAR is anything to write home about. We have significant issues with it, but we will return to those points in Committee.
	Clauses 12 and 13 make provisions for partnership arrangements, which we support. We welcome the regulations that will prevent the misuse of partnerships for the purpose of tax avoidance by focusing specifically on two issues. The first concerns partnerships and the tax-motivated allocation of profits and losses relating to the alternative investment fund managers directive, and the second concerns limited liability partnerships and the nature of the relationship between partners and the LLP.
	Focusing on the second issue, the current HMRC interpretation of the existing tax rules has meant that individuals who are members of an LLP are taxed as though they are partners in a partnership, meaning that low-paid workers taken on as LLP members have lost employment benefits and protections, while, at the other end of the scale, high-paid workers have benefited from a self-employed status and the resulting loss of employment taxes payable. It is time for the use of LLPs as a way to disguise employment status and avoid employment taxes to stop. We note that the Budget report estimated that the Exchequer gains would be £125 million in 2014-15, rising to £365 million in 2015-16, and we support action in this area.
	In conclusion, key aspects of the Bill began life as Labour party policy, so I suppose I should thank the Exchequer Secretary for giving us the rare pleasure of enacting legislation from opposition. It is a first for me, but one that I hope will happen many more times. The national insurance holiday scheme was a complete failure, and it is vital that the employment allowance gives businesses the support they need, but it is unacceptable that they will have been waiting four years for this support. Three of those years were wasted while he and the Government clung to the national insurance holiday scheme, and almost another year has been wasted as they have failed to take immediate action, instead introducing the employment allowance only from next
	April. Even when forced to change course and do the right thing, they are still failing to go far enough and act quickly enough. Businesses up and down the country deserve better.

Ian Swales: I warmly welcome the proposals in the Bill. We have already heard the statistics on its impact, including that 90% of the money involved will go to companies with fewer than 50 employees. That represents real help for small businesses up and down the country. I also welcome the fact that it will be much simpler to apply for the allowance, and that businesses will no longer have the kind of issues they are experiencing with the present scheme.
	It is certainly true that people and businesses respond to financial incentives, and it is no wonder that national insurance is sometimes called a jobs tax, because it can be a disincentive to employing people. It raises the bar to employing people and, given the importance of creating jobs in our economy, it is great to see that bar coming down. The Federation of Small Businesses has stated that the Bill will affect not only jobs; investment will also increase, as will the pay of the staff. I warmly welcome the FSB’s conclusion. Let us contrast these measures with the previous Government’s proposed 1% increase for employers and employees in April 2011. The independent Centre for Economics and Business Research said that that measure would have taken 57,000 jobs out of our economy—proving the point that national insurance can indeed be a big incentive either to employ people or fire them.
	I welcome the proposals relating to offshore oil and gas employees. Quite a number of them live in my constituency, and many have had great difficulty with the intermediary companies that employ them. The confused nature of the national insurance arrangements can cause them personal issues when they start to claim pensions, for example, so I welcome the simplifying measures and look forward to the remaining measures required to give offshore oil and gas workers the right status in our economy.
	The tax avoidance measures are also welcome. They are part of an ongoing campaign by the Government, who have already increased by 2,500 the number of staff employed to deal with tax avoidance and evasion. There is a lot more to be done, but we should all warmly welcome clauses 9 and 10, which will apply the general anti-abuse rule. This will prevent offshore payroll companies from avoiding national insurance.

Jonathan Edwards: How much of the annual tax gap does the hon. Gentleman think this measure will tackle?

Ian Swales: Very little. We heard from the hon. Member for Birmingham, Ladywood (Shabana Mahmood) that the measure will not bring in an enormous amount. It will, however, remove the loophole that has been used by many companies, including some of our merchant banks, to pay their staff offshore as a technique for avoiding national insurance. We have to welcome any measures that will improve that situation.
	I want to ask the Minister for clarification following the 2011 Budget announcement that tax and national insurance would be simplified and that work would be done to bring them together. We have long since lost the
	hypothecation of national insurance, and I wonder whether we could simplify the arrangements a lot more than we are doing at the moment. I hope he will respond to that point.
	The Bill is part of a big package aimed at supporting small and medium-sized businesses. Corporation tax is down from 28% to 23%, and it is heading for a rate of 20% by 2015. A new business bank has been proposed, along with other lending schemes. There has been a response to the Lib Dem campaign to increase capital allowances, which went up tenfold in the last Budget. That is particularly helping small manufacturing companies to increase their investment in equipment. The one in, two out policy on regulation is also a great help, as is the setting of small business rate relief at 100% for two and a half years. Those measures and more are driving the economy forward, and have now created 1.4 million jobs.
	Last week, a shadow Minister described his party as the party of small businesses. The laughter that greeted his statement almost brought the house down. If we look at what could have been done in 13 years and what this Government have done in three short years, it is quite clear to see who is out there supporting small businesses.
	The Opposition propose a business rate freeze, which would give small businesses about £450 over two years. These measures give businesses £4,000 over two years—almost 10 times as much. They are certainly a great help to small businesses. We have heard about the FSB supporting them, and about the Small Charities Coalition doing the same, while the CBI has also welcomed them. If there is a coalition of those organisations, we know we are doing something right.
	This Government are continuing to sort out the mess left by the Opposition, and the Bill will help to create jobs in our economy, will strengthen it and will make the national insurance system fairer.

Sheila Gilmore: It is a pleasure to follow the hon. Member for Redcar (Ian Swales). As so often when members of his party speak in these debates, they talk about what was happening to the economy in the period before the general election and after it as if they were two completely different things. Many of the views the hon. Gentleman has just expressed were certainly not those on which he and his party leader stood, so far as the manifesto is concerned, in the period leading up to the election.
	Anyone walking into this debate would think that it was yet another general debate on the economy—and, indeed, on the record of the last Government. Now that we are three and a half years into this Government, that seems somewhat strange. To me, it looks like diversionary tactics. Government Members are saying, “Let’s not talk about what we’ve done; let’s hark back yet again not just to the previous Government, but to proposals that never even came into effect”, suggesting that those proposals were somehow the cause of our economic difficulties. That clearly could not be the case.

Caroline Dinenage: I am grateful to the hon. Lady for giving way. I can understand why she would not want anybody to hark back to the 13 years of
	the Labour Government, when anyone who ran a business saw it become more and more uncompetitive, when our country slipped down the league for international and global competitiveness and when our businesses were shackled by endless amounts of red tape and bureaucracy. Has she had the chance to speak to any businesses at all about that record and how things have significantly improved over the last three years?

Sheila Gilmore: I thank the hon. Lady for her intervention, but I am certainly not going to say that many of my constituents did not benefit from the record of the last Government, and I am not going to accept her characterisation of that Government as not having helped the majority of people in this country. Yes, I have spoken to local businesses, and many of them have been struggling, particularly over the last three and a half years, to get loan finance to get their businesses functioning. Many have found it extremely difficult to operate in an economy that has been sent into decline by many of the measures that the incoming Government imposed. The picture presented by the hon. Lady is wrong.
	As I was saying, the concentration on what happened during the last Labour Government is a reflection of the fact that this Government know that their previous proposals on national insurance contributions simply did not work. We have heard a lot about predictions, and some people have suggested that the Opposition’s predictions about the economy were wrong, so the Government’s predictions, presumably by extension, must be right.
	However, what the Government told us in 2010 and 2011 was that they were going to eliminate, not just reduce, the deficit over the course of one Parliament. What we now hear over and over again is that the deficit has been reduced by one third, but it seems to have reached a plateau. That figure of one third has been invoked for a very long time now, which suggests that the Government’s original intentions and purposes have not been achieved. They have clearly accepted not only that they will not eliminate the deficit by 2015, but that everything has stalled and that deficit reduction has, as I say, reached a plateau. In 2010-11, it was predicted that we would see economic growth in 2010-12, not that we would be still waiting for it in 2013. Even now, the amount of growth we are seeing is very limited.

Ian Swales: Is the hon. Lady happy about the fact that she stood on a manifesto which included a national insurance policy that independent observers said would take 57,000 jobs out of our economy?

Sheila Gilmore: We do not know that that policy would have taken jobs out of the economy, because we did not have the opportunity to implement it.
	Another issue that is subject to repeated predictions is jobs. The number of new private sector jobs is constantly being put at about 1.4 million, but, interestingly, in January 2011 the Government were already saying that 500,000 jobs had been created. It is clear to anyone that even if those figures are accurate, and even if factors such as the re-categorisation of jobs into different sectors are taken into account, the pace of job creation is not quite as dramatic or as effective as we might think.
	We were told that the earlier proposal for a national insurance holiday was intended to create jobs. The fascinating aspect of that was the very low take-up. If all those new employers had set up new companies and provided new jobs, why did they not want to take advantage of it? Why did so few come forward? That surely casts doubt on the notion that numerous people were desperate to start up new businesses and to take on employees. In December 2012, there were only 20,365 applicants for the scheme. The Minister has told us that eventually there were 26,000, but the initial prediction was 400,000. There is a considerable difference between those figures.
	It is not surprising that the Minister was reluctant to respond to interventions from his own Back Benchers and to say what he thought might be the outcome of his current proposals, because he knows how poor earlier predictions have been. It is not just in respect of the national insurance holiday that predictions have been wildly at odds with the reality. For example, the youth contract, which involved offering money to employers to take on people aged between 18 and 25, was apparently going to be one of the major answers to youth unemployment. It was designed, we were told, to help 53,000 young people per year. However, in the first year of its operation it helped only 4,690. That was another not very successful policy that we had been asked to believe would help people in an important way. In that context, I think it significant that only last week the Work and Pensions Committee heard from the CBI that it would have liked to see extra money for training, rather than cash incentives for employers to take on young people. Perhaps the Government should listen to what people think would help create jobs.
	The Institute for Fiscal Studies has pointed out that the current proposals do not guarantee any additional jobs and that this is simply a tax cut. A tax cut may be beneficial and may bring about more jobs, but in itself it will not necessarily do so. Again, I would point to the previous record. The IFS says we do not know whether this proposal will have any effect on job creation as it will not be piloted and will be almost impossible to evaluate, and that we will therefore be unlikely to know whether it will be money well spent. We must bear in mind the previous history, which I have mentioned, of two schemes that both failed to help create employment, and we must ask the Government to monitor and evaluate this new proposal as much as they can if they are going to introduce it.
	The Government must realise that the creation of jobs is extremely important for many parts of this country. Many Government members and Back Benchers have expressed pleasure at the reductions in unemployment in their own constituencies, which is all very well, but unemployment levels in many parts of the country are still extremely high. What is even more important for many people is the lack of quality jobs and the fact that they often cannot work the number of hours they want to. We currently have the highest recorded level of people working part time who want to work more hours. That means people have low incomes and are often dependent on top-ups from Government benefits.
	The Government sometimes wonder why things like housing benefit keep going up rather than down, despite the reforms they put in place. The main reason is that
	people in part-time, low-income jobs on zero-hour contracts have no choice but to apply for such benefits, so even the jobs that are out there are often ones that leave people with a cost-of-living crisis. That causes real suffering, and there is no point in pretending otherwise.
	I ask the Government to indicate the likely take-up of this scheme—reluctant though they are to do—and to accept that their previous measures in this field have not been successful. Three years on, their initiatives have simply not been successful, and we see the results in the state of our economy today. Of course it is good that growth is beginning to return, but such low-level growth after such a long time can hardly be hailed as a success. If we want to argue about whose predictions were right, perhaps, at best, we have to say that nobody’s were. The Government’s predictions on coming to power in 2010 were certainly not borne out, and people have been suffering the results of that in the past three years.

Margot James: Before I come to my main points about this Bill, which I support, I would just like to follow on from the speech of the hon. Member for Edinburgh East (Sheila Gilmore) and talk about the big picture for a few minutes. One can quibble about the benefits or otherwise of this scheme or that one, but the Government’s economic policies and interventions have contributed to Britain becoming the fastest-growing country in the western world. Survey after survey confirms the figures, which are extremely optimistic about this economy. I sometimes think the Treasury team is, with characteristic self-effacement, almost cautious in putting forward the record of this Government in full technicolour, so I would like to take up that role this afternoon.
	The Bill is a straightforward and simple measure, top-slicing £2,000 off every company’s employer national insurance bill. As such, it will provide significant help to small businesses. I have 5,200 small and medium-sized enterprises in my constituency, and I welcome this measure on behalf of them all. We have heard the quotes from various organisations representing small businesses, social enterprises and so on welcoming the measure. The fact that it has such independent support ought to speak for itself.
	I also wish to draw attention to the ambitious sole trader. The SMEs will have their employer insurance bills cut, but we also need to consider the small sole trader who is ambitious and wants one day to grow his or her business, just as I did. When I started my business in the 1980s, it consisted just of my business partner and me—everyone else who helped was begged, stolen or borrowed. I well remember the agony of the decision to appoint the first paid member of staff. One knows that one has to do it at some point if one wants to grow the business, but the responsibility that comes from knowing that someone walking through the door is then dependent for their livelihood on the success of one’s business really makes one stop and think. Anything that makes that decision easier, as this Bill does, has to be welcomed.
	I wish to talk about a young woman in my constituency, Amy Fairley, who has a passion for flowers. She worked in a florist’s shop until about six month ago, when she was made redundant. She decided to follow her passion and dream by setting up her own florist’s shop. She did
	that with help from the new enterprise allowance scheme—another good scheme—and a Prince’s Trust grant and the mentorship that the Prince’s Trust also provides. I helped her to open her wonderful florist’s shop on Coventry street in Stourbridge three weeks ago. As a Prince’s Trust mentor for four years before I was elected, I have had similar experience and I was always reluctant to advise on taking on that first member of staff, because of the cost and the risk. One wonders whether the member of staff will be needed all the time, although, of course, they could be taken on part-time. The Bill will mitigate that caution.
	I also wish to make the point that the Bill is part of a package of measures designed to help employment and small businesses. The reforms to employment law are also crucial, because this is not just about the cost of taking someone on; it is also about the fear that if the wrong person is appointed, the business is in for a huge headache. The Government’s doubling of the qualifying period before people can make unfair dismissal claims to two years is a huge advantage, as is the fact that they are making settlement agreements easier, obviating the need for employment tribunals, which are expensive in many cases. I know from my work as a Parliamentary Private Secretary to Lord Green that the Government have invested hugely in UK Trade & Investment and UK Export Finance, again for the development of specific programmes to support small businesses with their exports.

Julian Smith: May I pay tribute to my hon. Friend for the work she has done to promote UKTI’s merits to MPs across the House and for doing that with a passion that I suspect has never been seen in this House before?

Margot James: I thank my hon. Friend for his kind contribution and for his wholehearted support of that work on trade—both are much appreciated.

Ian Swales: May I add my tribute to my hon. Friend for playing a role in this exercise? My constituency office is in a business centre and it was fantastic to see UKTI officials advising small businesses recently on exporting to China—I never expected to see that.

Margot James: I thank my hon. Friend for that intervention. Indeed, what he has observed might explain why British exports to China have risen at a record rate in the past 12 months.
	Another aspect of Government support for the small businesses that are crucial to employment and many of the new jobs that have been created has been the reduction in the small companies tax rate to 20%. The small business rate relief scheme was doubled until 14 April and we have also had the start-up loans scheme and the new enterprise allowance, which I have already mentioned. All those measures were designed to have, and have had, a positive effect on the livelihood of our small businesses.
	Of course, not just employers have benefited from such measures. Employees have benefited too. In my constituency, 3,794 people have been removed from income tax altogether. A vast number of people in my constituency—33,000—are now paying less tax and that is an important development, freeing people to spend more money on the high street, which is where the economy is starting to grow again.
	It is instructive to recall the Opposition’s record. The shadow Business Secretary makes the laughable claim that Labour is now the party of small business, but I think that small business people judge Governments, Oppositions and former Governments on their actions, not their words. The Opposition have a long way to go before they can put themselves up as people who understand the needs of businesses. As I said earlier, I think that it was indicative of their deeply flawed management of our economy that they felt in 2011 that they needed to put up taxes by putting up national insurance, rather than cutting public spending, which, of course, is what—only the other day—Tony Blair said they should have done. We all know how the economy ended up.

Sheila Gilmore: Is it not in fact the case that the incoming Government put taxes up? In particular, they put up VAT and that was the choice that they made. To say that no taxes went up would not be true.

Margot James: I would apologise if I felt that I had said that no taxes had gone up. Let me clarify in response to that intervention. I was making the point that the previous Government proposed to increase national insurance, presumably because they could not face the public expenditure cuts that this country really needed. The hon. Lady is quite right that the Government were driven to put up VAT, but the important point is that in getting a grip on the public finances we had a rough ratio. Spending cuts delivered approximately two thirds of what was required and the tax increases, regrettable though they were, were necessary and delivered the other third. I fear I digress somewhat, Madam Deputy Speaker, and I feel your watchful gaze so I shall return to the subject of the Bill.
	I congratulate the Government on introducing this important measure. I would have benefited hugely from it when I was in business and I welcome it on behalf of the many small businesses and sole traders in my constituency.

Richard Fuller: It is truly a great pleasure to follow my hon. Friend the Member for Stourbridge (Margot James), who is a mighty champion for our small businesses that are trying to access international markets. It is no wonder that her region leads the country in increasing exports to developing and developed nations around the world. She spoke most eloquently about the benefits for small businesses and echoed some of the points made by my hon. Friend the Minister about the impact of the Bill on the willingness of employers to add to their labour force.
	I want to focus on the Bill’s impact not on the quantity of people who will be employed but on the price of labour, and on how the Bill might be used to implement some of the efforts to create a living wage across the United Kingdom. The Treasury team have come across a useful tool in implementing that change, and it is up to them to see how much courage they might have to move forward with this initiative to achieve it. That marks the difference between those on the Opposition Benches, who wish to posture over changes in the economy on employment and wages, and Government Members, who are interested in taking action to achieve change.
	If I may, I shall consider the record of the previous Labour Government. As we have heard often today, the Labour Government were interested in increasing the tax on employment, and indeed went into the general election calling for increases in the jobs tax. Despite the words we have heard today, we have not heard one word of apology from the Labour party for saying at the last election that the right way to increase employment was to increase the tax on jobs. Still no apology on that, but it was part of a pattern that impacted negatively on the price of employment.
	Labour abolished the 10p tax rate. It created a tax credits system that was an incredibly complex way to give people a post-tax income on which they could live. Any of us with constituents who have been caught up with tax credits when they went wrong knows how hard it is for families when the tax credits office claws those tax credits back and savings have to be found. Why on earth was that system a good system? Underpinning it—

Sheila Gilmore: rose—

Richard Fuller: I will give way in a second; I would love to hear from the hon. Lady.
	Underpinning that system was Labour’s creation of a benefits system that discouraged work. We had hundreds of thousands of workers in our country going out to work on the minimum wage or a little more and seeing people living on benefits when they could have worked and ending up with a lifestyle that those people in work could not afford. Labour has not apologised for that policy and has opposed even the benefits cap.

Sheila Gilmore: Does the hon. Gentleman accept that the intention behind tax credits was indeed to encourage people to enter employment and that 350,000 single parents entered employment as a direct result of the introduction of the tax credits system?

Richard Fuller: The hon. Lady makes a point, but not a particularly good one. If the economy was borrowing so much money to stimulate employment, it was not a particularly outstanding outcome to achieve an increase in one part of the labour force of 350,000, especially when we consider the fact that every Labour Government have left office with unemployment higher than when they came to office.

Sheila Gilmore: rose—

Richard Fuller: That is the bigger picture to which I guess the hon. Lady wishes to return, as she is one of, I think, just two Labour Back Benchers in the Chamber.

Sheila Gilmore: I thank the hon. Gentleman for giving way again and being so generous with his time. That myth about every Labour Government leaving office with unemployment higher than when it came to office is not entirely accurate. For example, unemployment was extremely low at the end of the period in office of the 1945-51 Labour Government. Under the Tory Governments of 1979 to 1997, unemployment was more than 10% in the majority of those years.

Richard Fuller: The hon. Lady is digressing significantly from the Bill to talk about 1945, but in any debate I am more than happy— [Interruption.] Labour Front Benchers want to make an argument about how good the Labour party is in office at reducing unemployment. The facts are the facts: Labour comes to office and when it leaves, unemployment is higher.
	To return to the impact of the Bill on improving wage rates, let us consider the record of the coalition in government. We are in the process of raising the personal allowance to £10,000. I shall return to that point. We are targeting and simplifying tax credits and other benefits. We have introduced a benefit cap, making work pay. With this Bill, we are introducing an employment allowance, which will provide greater opportunity for us to improve wage rates. The living wage is a crucial issue that Members on both sides of the House should embrace. We should all endeavour to find ways to improve wages for those who are unskilled or on low pay. For many decades, real wages for people who are unskilled have been stagnant, or rising at a very low rate. One benefit of the introduction of higher wages is the potential that many businesses will see for higher productivity. Most importantly, if very small businesses are able to pay higher wages, there is reduced staff turnover. That is particularly important where there is low pay across a profession.
	I looked at the Bill with great interest to see how it could provide a solid basis for an answer to the question, “How do we implement the living wage in practice?”. Tomorrow, we will hear from the Leader of the Opposition about his approach. It was interesting that the shadow Minister, the hon. Member for Birmingham, Ladywood (Shabana Mahmood), said that one-off policies were a bad idea when it came to persuading businesses to take up a new Government scheme, but a one-off policy is precisely what the Leader of the Opposition will propose tomorrow as his approach to the living wage. If it does not work for national insurance contributions, how on earth will it work for substantial wage changes by employers? The problem with the Leader of the Opposition is that he just does not understand business.

Dawn Primarolo: Order. I have allowed the hon. Gentleman to range quite widely, but his comments must relate not to what might happen tomorrow, but to the Bill and its contribution or otherwise to the living wage; I think was the point that he wanted to develop. I would be grateful if he stuck to that.

Richard Fuller: You read my mind, Madam Deputy Speaker. I shall return directly to the implications of the measure for the living wage and wage rates. Let me give some numbers showing the impact of a change from the minimum wage to the living wage, and say how the Bill can help to achieve that change for the long term.
	Let us consider what happens when a married person who works 40 hours a week, has two teenage children, and earns the minimum wage, which is £6.31, moves to the living wage, which today went up to £7.65. I am using the numbers for outside London, because I represent Bedford, which is outside London. The employee’s gross pay would increase from £13,125 to £15,912—an increase of 21%. After the changes to their tax, national insurance and tax credits, their net take-home pay, which is what matters to them, increases from £15,067 to £16,483—a
	welcome increase, but an increase of only 9%. That is the impact on the family of the change from the minimum wage to the living wage.
	Looking at the cost to the employer, there is an increase in salary of £2,787, and an increase in the employer’s national insurance contributions of £385; that is essentially a 23% increase in the cost of employing that person. Then there is the impact on the Exchequer. It benefits from an increase in income tax of £557, and an increase in the employee national insurance contribution of £335. The reduction in the payment of tax credits benefits the Exchequer by £479, and the increase in employer national insurance benefits it by £385. The Exchequer ends up increasing its tax take by 32%. The change from the minimum wage to the living wage means a modest but welcome increase for the employee, has a high cost for the employer, and brings a substantial benefit, on my calculations, for the Exchequer.
	In that context, let me say this about the Government’s use of the employment allowance to give something back to our hard-pressed employers and small businesses: £2,000 is a start, but we have found a tool here, if we have the courage to use it, that we can use to encourage—not compel—our private sector employers to accept a living wage. Her Majesty’s Revenue and Customs could act as a compliance officer for those who seek to pay the living wage, as it does for the minimum wage. We could pay back some of the significant gain to the Exchequer that my simple calculation has brought up, though I am sure that there are more complicated numbers out there. There is a useful tool here, and this is a small start. Let us have the courage to see how we can improve living conditions and wages for our low-paid workers, and use the Bill as the start of a better future for all of us.

Caroline Dinenage: I am grateful for the opportunity to speak in this important debate, and to follow such an array of wide-ranging, informative, quality contributions from my hon. Friends and colleagues. The Bill is a key part of a wider programme that the Government have undertaken to support aspiration, encourage job creation, and boost growth. As a small business owner, I am proud to speak in support of a policy that will help firms around the country to expand, innovate and, crucially, create jobs. To put it simply, the Bill is great for small businesses, great for charities, and great for Britain.
	As we have heard, the key part of the Bill will save all businesses in the country up to £2,000 in class 1 national insurance contributions. Taking a tax off jobs will make it much easier for millions of people who have set up firms to take on new employees. Do not take my word for it; Anne Redston, professor of law at King’s College London, says:
	“At a stroke, this new relief…removes the ‘jobs tax’ on millions of small businesses, and is likely to encourage one-man businesses to take on their first employee.”
	What is more, 98% of the benefits of the change will go to small and medium-sized enterprises. As we have heard, 450,000 small businesses—one third of all the employers in the country—will pay no jobs tax at all.

Julian Smith: Does my hon. Friend agree that not only is this an exciting proposal overall, but the fact that social enterprises and charities—many of which, in her
	constituency and mine, are highly innovative and create jobs—are included is a really good thing?

Caroline Dinenage: My hon. Friend makes a key point. The fact that the measure is open to charities and social enterprises, as well as businesses, is really important. That is another step in the right direction by the Government to make it easier for small firms and charities to take on new employees. This is not just about business; the head of policy and research at the National Council for Voluntary Organisations, Karl Wilding, says that the idea is
	“a very positive thing…To a small organisation, £2,000 is a lot of money.”
	He is absolutely right. When I set up my business at the age of 19, £2,000 would have been a massive incentive to take the big step of hiring my first member of staff.
	My hon. Friend the Member for Stourbridge (Margot James) spoke powerfully about her experiences of starting up a business. As she said, taking on that first member of staff is a really big moment—a huge decision. It is a massive responsibility; the person hiring becomes responsible for someone’s income, livelihood and wages.

Bob Stewart: And their family.

Caroline Dinenage: And their family. I am pleased that the Bill makes that moment so much more likely. There are many statistics that show how great an impact the change will have. We have heard some amazingly powerful statistics this afternoon; for example, over a year, employers with fewer than 10 employees will have their national insurance contribution bill cut by 80%. However, it is easy to get bogged down in figures. What does the Bill mean for charities and small businesses up and down the country? It means that the small-time cupcake seller who works out of their kitchen and wants to expand, but is not sure that they can afford to, is now £2,000 more likely to give a young person their first foot on the jobs ladder. It means that the mechanic who needs another pair of hands to deal with a recent increase in demand can take someone on and pay them up to £22,000 without having to pay any jobs tax. It means that the Government are continuing to deliver exactly the kind of policies that have, so far, created 1.4 million private sector jobs and put the country on the path to prosperity.
	There are so many ways in which the Government have helped small businesses to flourish. Locally, I have been involved in a really successful regional growth fund bid—a partnership between The News, which is our local newspaper, and the Solent local enterprise partnership. The Bridging the Gap scheme is a pot of money that new start-ups and small firms can bid for to help grow their business and create jobs. I recently visited three of the Bridging the Gap success stories in my constituency, including Kev Jones and Son, an independent convenience store at the heart of the community, which is, you will be interested to hear, Madam Deputy Speaker, the go-to shop for your Christmas meat hamper. The people there had very ambitious plans to expand. With a little bit of extra money, they were able to bring those plans forward, and they have now doubled their floor space and created some of the new jobs the area so desperately needs. These are exactly the kinds of businesses that we will be supporting through this Bill. That is absolutely the right thing to
	do, because they are not just the backbone of our economy but the lifeblood of our communities. The Bill is a key part of the wider programme to make Britain the most small-business-friendly environment in Europe.
	By cutting Labour’s deficit, the Government have secured record low interest rates for hard-working families and small businesses across the country. From April 2015, corporation tax will be cut to 20%—the lowest in the G20. As a result of the Government’s policies, the UK recently topped KPMG’s list of the most competitive countries in which to do business, beating Switzerland, the USA and France for the first time ever. This hard work is getting results. The latest figures from the Office for National Statistics showed strong growth of 0.8% for the third quarter of 2013. That proves that the only way to create real prosperity and to raise living standards is not through quick-fix gimmicks but through straightforward solutions: backing businesses to create growth, cutting taxes to boost growth, and supporting hard-working people.
	Labour Members have presented this as being somehow their idea. That appears to show brass neck of almost biblical proportions. Anyone who ran a business under the previous Labour Government, as I did for 13 years, will know that we were shackled by endless amounts of bureaucracy as the country fell deeper into debt and slipped down the international competitive league tables. We cannot escape the fact that they got it very badly wrong on the economy as well. They said we would lose 1 million jobs. Instead, we have seen the creation of 1 million net jobs—three in the private sector for every one lost in the public sector. Because this Government have cut taxes, slashed red tape and unleashed innovation, we have seen record levels of small business creation and employment. I am confident that the Government will continue to deliver the right policies.

Sheila Gilmore: Does the hon. Lady accept that the rate of employment has not yet reached the level it had reached prior to the recession, even if some numbers, many relating to part-time work, have gone up?

Caroline Dinenage: The hon. Lady can throw facts and figures around as much as she likes, but unemployment was so high when we came into government purely as a result of the Labour party’s economic policies over 13 years. Everything we have done until now has been to try to put the brakes on and reverse that, bringing employment back to households that may not have had it for over a decade.
	I am confident that the Government will continue to deliver jobs and deliver the right policies, such as this Bill, backing small businesses to create the jobs we need and keeping us on the path to prosperity.

Julian Smith: Because I lost a contact lens on the tube, Madam Deputy Speaker, I can see you but unfortunately cannot see the Minister. I apologise in advance for the fact that my myopia means that I will be slightly less coherent than usual.
	This Bill is a fantastic boost to all British business. In a constituency such as Skipton and Ripon, it is a particularly good shot in the arm for an area of Britain where employment is on the up and unemployment is
	going down. In my constituency, unemployment is down by about 30% and youth unemployment is down by about 35%, and more new businesses are being created. This is a big opportunity to give those entrepreneurs the backing they require to take on more jobs. The businesses in my constituency are largely based around tourism, agriculture, farming and small manufacturing. Many of the businesses in the 900 square miles that I represent are working under tough conditions, isolated and very vulnerable to the weather, and every bit of help they can get is a major boost.
	We are very excited in the Yorkshire dales and in all parts of my constituency because in less than a year the Government-backed Tour de France will be on its way. I hope that the Minister may come and participate; I know that she is very into her sport. That event, which this Westminster-based, Conservative-led Government have backed, will be a major boost for Yorkshire—one of the most rural parts of our country. This policy will help businesses to try to make sure that they are taking advantage of this great sporting event.
	We have talked about how this policy contrasts with the policies of the Labour party. Most of my colleagues in the Chamber have set up and run businesses, and we probably all agree that at the start of the previous Government’s time in office the messages were quite good. There were things such as taper relief to encourage entrepreneurs and talk of deregulation tsars, and it all looked as though it was moving in the right direction, but it tailed off pretty quickly. As well as pledging at the last election to raise the jobs tax, which the Federation of Small Businesses said would cost about 57,000 jobs in the UK, they raised the 50p tax rate—one of the so-called elephant traps set by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) to try to trap the next Government. Six regulations were added to the statute book per week. There were regular, astronomical rises in fuel duty, which in a constituency such as Skipton and Ripon had a major impact on businesses and families. Somebody may correct me, but I understand that not one debate about exports took place in this House under the previous Labour Government.

David Rutley: My hon. Friend is making a characteristically impassioned speech on behalf of small businesses and enterprises, which will thrive on the back of this Bill not only in North Yorkshire but in Cheshire and across the country. Will he remind the House of what steps the previous Government took to tackle the amount of regulation that was coming in from the EU at the time? I cannot remember too much that they were doing in that direction either.

Julian Smith: My hon. Friend makes a characteristically good point. I seem to remember that they signed up to more treaties and more red tape from Brussels. Only now have the Prime Minister and members of the current Government set up a deregulation unit to look at EU regulation, and I hope that we will all encourage them to do more. Any claim that Labour is the party of small business is a very hollow one.
	The reason for my excitement about this policy is that it is one of a very large number of policies to back the risk-taker and the entrepreneur—the person who is ready to spend all night worrying about the new employee and ready to risk their capital. A few weeks ago, I went
	to Downing street with a number of right hon. and hon. Friends, and I met the most inspiring young people who were beneficiaries of the start-up loan scheme and the new enterprise allowance scheme. Downing street was packed with budding entrepreneurs who were benefiting from this Government’s policy. That policy is one of many, including taking out two regulations before one regulation is brought in; ensuring that 25% of all procurement goes to small businesses; taking away pre-qualification questionnaires; increasing the annual investment allowance from £25,000 to £250,000; cutting corporation tax; investing in apprenticeships; creating 27,000 business mentors; and introducing the regional growth fund and the local enterprise partnerships. There is an endless list of policies that this Government have put in place to back the entrepreneur.
	That is not to say that we are perfect. The Government have a very strong record, but I would pose them a few questions. We are doing so many good things that we often fail to communicate them in as coherent and focused a way as possible and in a way that is easiest for small businesses. I encourage the Minister, who is coming turbo-charged into her new job, to consider the role of HMRC. The Government communicate more through HMRC than any other arm of Government. How can we use it better to signpost, particularly to small businesses and micro-businesses, the good things that this Government are doing?
	How can we cut bureaucracy? We have heard about the bureaucracy involved in the national insurance holiday. How can we make sure that any red tape involved in this new policy is reduced as much as possible?
	I urge the Government and my party to start differentiating ourselves not just from the Labour party, but from our coalition partners, with a small business Bill to show that we need to do even more to take small businesses out of the regulation quagmire they find themselves in. I remember sitting through the debate on the Government’s employment changes—colleagues have already discussed them—which were very simple and straightforward. Employers will have two years before they have to decide whether they want to keep an employee. Settlement agreements will at least allow an employer to offer an employee a deal when things are not working out. There will also be tribunal charges, not for people who cannot afford it—before Opposition Members intervene—but for most employees, who will have to pay a fee before taking an employer to tribunal. All of those really good changes—every single one of them—were opposed by the Labour party. It is heartening that, despite Labour’s rhetoric, it looks as though its Members are going to back this Bill, not by voting in favour of it, but by not opposing it.
	I pay tribute to the Treasury, the Exchequer Secretary, who started this debate, the Chancellor and the Conservative Ministers at the Department for Business, Innovation and Skills, who are pushing ahead with enterprise reform. This Bill is a major step towards sealing the Conservative party’s record on backing those people in our society who want to take a risk and run a business.

David Rutley: It is an honour and a privilege to follow the impassioned speech of my hon. Friend the Member for Skipton and Ripon (Julian Smith).
	I was fortunate enough to secure an Adjournment debate last week. The good news was that it was on the subject of supporting first-time employers, but the bad news was that I secured the 2.30 pm on a Friday afternoon slot, which is not always prime time in Parliament. I am therefore pleased to be able to return to the subject and debate it further in the presence of a few other colleagues.
	The good news is that over the past decade the number of people who work for themselves has increased to 4.2 million, or 14% of all those in employment—up from 12% at the start of the century. They are taking the chance to be their own boss and often embracing new technologies to enable that. Record numbers of people are working for themselves. As I have said, that is good news, but it would be even better if more of the self-employed, one-person businesses and sole traders took the step from being first-time entrepreneurs to being first-time employers. That is why I support the new employment allowance: it is a huge step forward.
	Entrepreneurialism is a culture that spreads. Once a person is in it, they live it. They go native, as they say, and embrace risk-taking. Significantly, entrepreneurs are more likely than established businesses to take on workers from the ranks of the unemployed or the non-active, who often find the formalised application processes, let alone the working practices, of large firms restrictive. Established companies may tend to value the ability to adhere to existing processes and systems above the creativity, dynamism and individual flair that smaller businesses help to stimulate. Doing more to encourage the smallest firms to take on staff, particularly a first member of staff, has to be a step in the right direction.
	Despite siren warnings from the unions and others that self-employed jobs are not proper jobs, there is clear evidence that the self-employed and those employed by them in the smallest companies enjoy better industrial relations. Data from the most recent workplace employment relations survey suggest that 67% of employees in the small and medium-sized enterprise sector strongly agree that managers treat them fairly, compared with 53% of those who work in large firms.
	Furthermore, a survey by the TUC, no less, and YouGov has shown that a greater proportion of employees in small firms report the highest levels of job satisfaction, compared with employees in larger firms. However, as my hon. Friend the Member for Skipton and Ripon has said, there is still a tendency in Whitehall to prefer to deal with larger companies and to underestimate the burdens on the smallest businesses when introducing uniform regulations. The new employment allowance, however, shows that this Government understand the importance of measures that, though uniform, are of greatest benefit to the smallest operators, and that is why they should be commended.

Bob Stewart: I endorse my hon. Friend’s last point. It is clear that if the boss of a business works closely with his first employee, industrial relations should be excellent and there should be no problems. That is the reason for the 67% satisfaction rate.

David Rutley: My hon. Friend makes an important point. That is absolutely the case. This is about how we build good working relationships and a strong economic base through SMEs. That is far more sustainable than
	the approach adopted by the previous Government, which seemed to be underpinned by more and more public spending. That is completely unsustainable.
	What a boost it will be for more of the growing army of the self-employed to become small employers. Indeed, if they all, or a vast proportion of them, took on one employee, that would make a huge dent—even bigger than the current one—in the unemployment figures. The number of self-employed people with no employees has increased, but the number of self-employed people with a small number of employees has not kept pace, and that is what the Bill seeks to address. In the past, the focus has been more on encouraging people to start up a business and less on taking the next step to becoming micro-employers. The Bill is an opportunity to further liberate the self-employed from barriers to growth and to nudge first-time entrepreneurs into becoming first-time employers. The prize is stronger, more sustainable economic growth.
	Micro-businesses play an important role in Macclesfield, working in forums like Make it Macclesfield and the Poynton business forum. They make a huge contribution to strengthening the community and, at the same time, moving our economy forward by creating jobs.
	Surveys and statistics abound to show that small businesses can be, and often are, job-creation machines. They also show that small businesses are more likely to employ the longer-term unemployed and those who may struggle to enter the job market as a result of a lack of formal qualifications or, indeed, their ethnic background. This is what the Federation of Small Businesses calls the “entrepreneurial pipeline” to what Professor Mark Hart calls “growth gazelles”. We need to encourage more growth gazelles. Essentially, this is about everyday entrepreneurs, street-level small businesses and office-share operators giving people a chance to work. Analysis by the FSB suggests that 74% of those who become self-employed and who have employees come from the self-employed who had no employee, and that a further 13% come from employees who had been working in micro-businesses. Clearly, there will be a multiplier effect once we get this right and start moving in the right direction.
	The Government are absolutely right to introduce the new employment allowance. Slashing the cost of national insurance and taking many employees out of it completely will encourage more of the self-employed to become employers. However, this is not—and nor should it be—the only measure to increase the number of first-time employers. The Bill must be viewed in concert with the new enterprise allowance—for which Levi Roots is an ambassador for the Government—which seeks to encourage the longer-term unemployed into self-employment. The three-year moratorium on new regulations for small businesses is another important step in the right direction. I encourage Ministers at the Department for Business, Innovation and Skills to view it as a rolling moratorium.

Julian Smith: I thank my hon. Friend for giving way in his excellent speech. Does he agree that one of the most depressing things about the lack of Labour Members present is that, to make those schemes truly work, we all need to push them, whatever our political viewpoint, in order to ensure that those who are taking the risks hear about them and understand them?

David Rutley: Absolutely; there is a responsibility on all Members to do that. It is disappointing how few Opposition Members are present, and what they have said has been negative, rather than focused on the opportunities that are available.
	As Lord Young of Graffham has rightly argued, there are regulatory issues that we must deal with. The employment allowance will simplify the system for small businesses. We must also tackle the problems with culture and communication. Through careers advice in schools, we must help young people to realise that there are huge opportunities in small businesses. If people are familiar with SMEs and particularly micro-businesses early in their careers, they are more likely to stick with them and to take the step of setting up small businesses themselves.
	There is certainly no lack of ambition. The Prince’s Trust has found that up to 30% of young people expect to be self-employed, and a YouGov poll has found that 43% of young people have made money through entrepreneurial activities, like selling their own products or working on a freelance basis. We must help them to achieve their ambitions. The Bill means that their aspirations will not just be pipe dreams. It is a can-do Bill for a can-do generation and it deserves our support.
	Those who seek to regulate businesses or to complicate the tax system should recognise the consequences of doing so. Whitehall communications must take notice of business-to-business communications so that those communications can be strengthened. My hon. Friend the Member for Skipton and Ripon highlighted the importance of the work of HMRC on communicating more effectively. I would add to that the work of Directgov.
	As Lord Young says, it is vital that the psychological barriers are broken down so that they do not stifle the ambition that is latent in the marketplace. If we are to create an aspiration nation, the road to running one’s own business must be a clearly signposted fast lane, not the last Labour Government’s minefield of forms, box ticking and regulations. Their approach reminded me of a sign that I saw once to a business park, which said, “Enterprise Way—Cul-de-sac”. We have to have a different perspective and that is what this Government are seeking to achieve.
	In small firms, there is often less formality, more fluidity and greater flexibility. What we need, and what we now have, is a simple tax allowance that everybody can understand. That will create more jobs and more first-time employers. It is vital that the Government communicate the scheme creatively. I also say to the Minister that we must not listen to what is said by the Opposition. The idea that we have listened to them in designing the scheme is fanciful. After the deficit and flawed forecasts that they gave us, the chances of our listening to them are somewhere between no hope and Bob Hope. Their jobs tax, on top of the record deficit, would have been devastating for the economy.
	In conclusion, I am delighted that the Government are champions of first-time entrepreneurs. I believe that the Bill will help us to encourage more of them to become first-time employers. I give the Bill my full support.

Damian Collins: I will say a few words in support of the Bill. Like all Government Members, I believe that this is an excellent measure that
	recognises that it is businesses of all sizes that create jobs in this country. People are now finding jobs in growing numbers. By reducing taxes on employment, we will make it more likely that businesses will employ more people. The strength of the recovery in the private sector underlines the growth in the economy as a whole. The Labour party predicted that growth would not come and that jobs would not be created. By reducing the cost of national insurance to employers, the Government are in this Bill taking another excellent step in the right direction.
	I agree with the Exchequer Secretary that we should look at the Bill as one of a range of important measures that the Government are introducing to support the business community, and all those measures support each other. My hon. Friend the Member for Skipton and Ripon (Julian Smith) spoke of meeting young people under the age of 30 who had received StartUp loans from the Government to invest in starting their own businesses, which have had a great deal of success. The Bill will help businesses like those to get to the next stage on the path to growth and to go from being a start-up to employing a small number of people. There is an enormous appetite among people in this country to have a go at starting their own business. That is one of the most positive things to come out of the recession. We need policies that work with the grain of people’s entrepreneurial instincts and back them as they back themselves.

Bob Stewart: I have listened carefully to this debate. I have never run a small business; I have run a medium-sized business, but it was not my own. Would it not be a tremendous fillip to small businesses if HMRC was slightly more proactive when it saw a business making a clear mistake, and wrote to it saying, “It would be better if you did it this way”?

Damian Collins: My hon. Friend makes an important point. The quality of the advice to businesses from all quarters is important. That echoes a point made by my hon. Friend the Member for Skipton and Ripon, who said that we all need to advocate the Government’s policies to ensure that businesses benefit from them.

Julian Smith: I pay tribute to the work that my hon. Friend has done within our party for a number of years to encourage entrepreneurs. It has been a most successful scheme. May I ask him for his reflections on that scheme? We have talked about the StartUp loans scheme and the new enterprise allowance, but he probably has the most experience of any Conservative Member of the competitive encouragement of small businesses.

Damian Collins: It is very kind of my hon. Friend to make those remarks. The start-up hub competition at the Conservative party conference has given small businesses an opportunity. That has been a good way to ensure that those businesses are plugged into the decision makers and people with influence in their local communities, and to ensure that they are benefiting from the breadth of schemes that the Government have to offer. We have run the competition for three years.
	At this year’s party conference, I was pleased to meet Neill Ricketts of Versarien, which employs groundbreaking technology to improve the cooling systems that are used
	in the mainframes of computers and data storage systems. That business, which started within the lifetime of this Parliament, is going from strength to strength. It was floated on the alternative investment market this year, employs a large number of people and is growing fast.
	There is a business in my constituency that was started by a group of young men. The managing director is only just 30 years old. The business specialises in search engine optimisation and social marketing campaigns. It employs more than 20 people and is growing rapidly. It has developed a way of specialising its techniques for small local businesses so that it can design social media and search engine optimisation campaigns to help businesses on the high street to grow.
	People are using their knowledge and expertise to develop innovative businesses and to demonstrate that there is a market for them that has not been realised. People are developing cutting-edge technologies and products that will be exportable and that will help businesses to develop and grow.
	One business that succeeded through the start-up hub competition was started by Julian Hakes, who redesigned the high-heeled shoe. He is an architect and he applied the principles of architecture to a fashion item. This year, his product was given the accessory of the year award by Vogue. It went viral on the internet and he has export orders from around the world. That was all based on a good idea that he was able to take to market. Credit is also due to two good trade bodies, the British Fashion Council and the UK Fashion and Textile Association, which supported him in the development of his business.
	There are some brilliant people who are doing great things. We need to get behind them and support them. We have good schemes that can do that. My hon. Friend the Member for Skipton and Ripon made a good point about our advocating those schemes and ensuring that people are aware of them. At Tech City in east London, one hears people talking enthusiastically about the enterprise investment schemes that are available. When we meet politicians from Germany, as my hon. Friend has done, we find that they are interested in the way that we use enterprise investment schemes to encourage private investors to invest in start-up businesses. However, I wonder whether our own chambers of commerce and people around the country know enough about the schemes that are available and that they could benefit from. We all have an important role to play in advocating the Government schemes that are there to help people get their businesses to the next stage.
	That support sits alongside a strong regional growth policy that is being delivered through the regional growth fund. In east Kent in my constituency, the regional growth fund has granted a third of the money that has been awarded. Tens of millions of pounds are being spent and invested by businesses. People are being employed on the back of that investment.
	H. V. Wooding in Hythe, which was visited by the Minister of State, Department for Business, Innovation and Skills, my right hon. Friend the Member for Sevenoaks (Michael Fallon), is investing in a new plant and machinery to expand its production capabilities. It is a precision engineering company that makes parts for the Hadron Collider at CERN, and it makes busbars that are used across a wide range of industry and machine parts for Formula 1 engines. It is bidding for contracts that have
	gone overseas in the past decade, to bring them back to this country because it can compete in that sector. It is benefiting from regional growth fund money, which is helping it take its business to the next level, and it is employing people now.
	One reason why unemployment is falling much faster than predicted is that the schemes to benefit smaller businesses are helping them grow and employ more people, and we are seeing the knock-on effect. It is not only bigger businesses that are doing well and competing, but smaller ones too. The challenge we should set ourselves is: “Do we have a strong and robust investment culture? Is this a country that people around the world want to invest in?” Increasingly, we are seeing that it is. People are investing in this country because of low levels of corporation tax compared with our competitors in Europe and America. That is why people are bringing investment from all over the world to this country.
	Not only are smaller businesses investing in themselves, but the investment community is investing in them through crowdsource funding and companies like Funding Circle. People can match fund some of the Government schemes to help businesses get the finance they need, and that is an important part of the growth of our economy. In the ’80s, thanks to privatisation we were seen as a nation of shareholders. In the next decade, could we be a nation of shareholder and start-up businesses where people take advantage of available schemes to invest in start-up and smaller businesses in their areas? We should set ourselves that challenge.
	Finally, we should not lose sight of the big projects that the Government must back, including those that will not benefit us directly in this Parliament but are important for the next 10 to 20 years—major infrastructure projects like high-speed rail or investment in electricity power generation. Such projects are vital for our future competitiveness. We have sometimes looked at other countries and seen how their infrastructure has helped them to compete. We have the tax and investment policies, ideas and people to compete, but we must ensure that we invest now in the big infrastructure projects we need to help those people grow in future. I commend those projects that I have touched on in my remarks, as well as the Bill which, as my hon. Friend the Exchequer Secretary said, is an important part of the range of measures that the Government have put in place to support entrepreneurship in this country.

Catherine McKinnell: I believe this is my first opportunity to congratulate you, Madam Deputy Speaker, on your new role. We have had a good and wide-ranging Second Reading debate on the Bill, and my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), my new colleague in the shadow Treasury team, made an excellent opening contribution from the Opposition Front Bench. I extend my welcome to the Minister. We have already exchanged pleasantries in a Committee, but I reiterate them now in the Chamber.

Julian Smith: As well as exchanging pleasantries and niceties, will the hon. Lady commit now to backing the Government’s policies and give actual support?

Catherine McKinnell: It is interesting that the hon. Gentleman raises that point, because the Opposition will set out clearly that we very much support and welcome this measure. It is something we have been proposing for the past three years, so we greatly welcome its introduction through the Bill.
	We have had a wide-ranging debate. We have touched on the living wage, the economy, employment, unemployment self-employment—many forms of employment. We have strayed far from the core subject and, I think, strained the patience of the Deputy Speakers in the Chair today. At times, we have been on a magical history tour in which the history of this country and its economy has not only been airbrushed, but at times rewritten. In my concluding remarks, I hope to bring back a bit of realism to the discussion. I know that the hon. Member for Skipton and Ripon (Julian Smith) finds that somewhat depressing, but I am going to do it anyway.
	I am disappointed that the Exchequer Secretary is not in his place for the winding-up speeches, as it is important to take a little step back in time and recall how the Bill was introduced. Until recently he was my opposite number, and it would have been good to have him in his usual place. The hon. Gentleman has the dubious privilege of being one of an ever-diminishing number of junior coalition Ministers who have been in the same job since 2010. He therefore finds himself in an unfortunate position because we can measure the ambitions that he set out for supporting small businesses and job creation against his actual record of delivery in government.
	As we have heard, although this was not included in the draft Bill published on 16 July, the main purpose of the National Insurance Contributions Bill is to implement the employment allowance announced by the Chancellor in the Budget 2013. Given the apparent importance of the policy—which accounts for clauses 1 to 8 of this short Bill—perhaps when she concludes the Minister will say why the employment allowance was not mentioned in the draft legislation. It would be useful to clarify that.
	As my hon. Friend the Member for Birmingham, Ladywood made clear in her excellent opening speech, the Opposition support the introduction of this measure and this Bill. It might be painful for the Exchequer Secretary—although he is not here to pained—but it could be helpful to cast our minds back to why we support this Bill. Let us think back to 2011 and the similarly entitled National Insurance Contributions Bill of that year.

Richard Fuller: Before the hon. Lady casts our minds back to 2011, may I ask her the question I asked her hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood)? In 2010 she stood on a manifesto that planned to increase the jobs tax. People want politicians who are honest, so will the hon. Lady say that that was a mistake?

Catherine McKinnell: I will repeat the words of my hon. Friend, who said that she was proud to stand in 2010 on a manifesto for a Labour Government who were committed to reducing the deficit but had an economy that was growing. Since then we have seen three years of stagnating growth, wages rising slower than prices, and borrowing not coming down anywhere
	near the amount the Government promised. I would caution Government Members against trying to rewrite in this Chamber the history of what they have achieved over the past three years.
	On that point, let us return to 2011. The Bill taken through this House by the Exchequer Secretary—I welcome him back to his seat—included the introduction of the three-year national insurance holiday, worth £5,000 for employers. The scheme, which was originally announced at the Chancellor’s first Budget in June 2010, was not aimed at supporting just any employers, however, because it was restricted. It did not apply to businesses in London and the south-east or east of England, as we mentioned earlier, and it extended only to new business start-ups, and then only to the first 10 employees of those firms—but, of course, only to those first 10 employees who had been hired in the first year of that business. I hope hon. Members are still with me. [Interruption.] I am sure the Minister is still with me as he designed the dubious policy.
	Indeed, serious concerns about the scheme’s complexity were raised at the time by Robert Chote—then at the Institute for Fiscal Studies; now at the Office for Budget Responsibility—who told the Treasury Committee that the policy
	“might be a little too complicated to offer best value for money.”

Julian Smith: Was the context at the time that the Labour party had left the nation’s finances in the most appalling mess, and that for any incoming Government not to target a policy carefully would have been crazy? According to the Government auditor, three Government Departments had lost complete control of their finances.

Catherine McKinnell: Once again, Government Members want to airbrush the past three years of stagnation, lack of economic growth and the failure of the Government’s implementation of that policy. They failed to address the issue quickly enough, so only today are we finally introducing a policy that will help and that will give that support to small businesses. Unfortunately, it is a little too late in the day for some businesses, which have suffered over the last three years, and for the people who have lost their jobs as a result.

David Rutley: In the spirit of not wanting to airbrush, will the hon. Lady tell the House how she thinks the jobs tax would have helped her much-cherished goal of encouraging economic growth?

Catherine McKinnell: Coalition Back Benchers want to forget what the Government have done and the past three years of the policy we are debating. They want to debate a policy that never came into play.
	None the less, despite the restrictive and complex nature of the previous scheme, the Exchequer Secretary and his Treasury colleagues had bold ambitions for it. He acknowledged from the Dispatch Box that some 400,000 new businesses would benefit from the scheme, with each successful applicant creating an average of two jobs. At that rate, the scheme would have created 800,000 new jobs, with a total cost to the Exchequer of £940 million over its three-year lifespan.
	Given that the scheme, which was one of the Chancellor’s flagship policies, drew to a close in September, one might have assumed that the Exchequer Secretary would
	want to promote the outcome. Sadly, he cannot do so—sadly for the businesses that failed to benefit. Only through a written answer obtained by my hon. Friend the Member for Nottingham East (Chris Leslie), the shadow Chief Secretary to the Treasury, did we learn that a grand total of some 25,400 businesses successfully applied for the scheme over the three-year period. That is undeniably a sizeable number, and the creation of any new jobs in the past three years, during a period of economic stagnation, is welcome; but with only 6% of the target reached, the Exchequer Secretary has had to acknowledge that, as flagship policies for economic growth go, that one has been a bit of a flop.
	When the previous scheme was introduced, the Opposition called for there to be no regional restrictions on it, for it to be extended to charities, and for a review of its effectiveness after six months. Those proposals were rejected. The Government ploughed on with a scheme that obviously was not delivering the goods throughout its operation. That was why, as long ago as September 2011, my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, called for a one-year national insurance break for every small firm that took on extra workers, using the money left over from that failing Government policy—it was clear that it was failing even in September 2011.
	The Government are now introducing the employment allowance. It is not regionally restricted and will apply to charities as well as businesses, and it will apply whether or not they are start-ups. It should be easier for firms to access it because it will be delivered by the standard payroll software and Her Majesty’s Revenue and Customs real time information system, as the Exchequer Secretary said in his opening comments. The question is this: why did it take so long? Given that the scheme will not be available until April 2014, we have had nearly four wasted years when the Chancellor could have helped the thousands of small businesses about which Government Members have spoken so passionately to expand and create jobs.

Margot James: This might be a foreign notion to Labour Members, but one reason why it has taken three years to propose the Bill is that the Government have waited until the country can afford it and put the finances right in the meantime.

Catherine McKinnell: The budget for the policy in the Bill was there, but the Government introduced a failing policy that was badly delivered, badly thought through and not revised in the appropriate time frame. Given the Government’s record on delivering the previous national insurance contributions initiative, what reassurances can the Minister provide that they are on top of delivering this one?

Julian Smith: Will the hon. Lady confirm that, having supported the Bill, she will call on all Labour MPs to promote the Bill vigorously and dynamically in their constituencies? Will she make that commitment?

Catherine McKinnell: The Opposition support the legislation and it will pass unopposed this evening. It is rightly up to the Government to promote their support for small businesses. As Government Members have
	said, HMRC should take a proactive role in ensuring that businesses are aware of schemes that are available to support them.
	Clauses 11 to 20 relate to the certification scheme for oil and gas workers on the continental shelf, limited liability partnerships and several miscellaneous measures, but I want to focus briefly on clauses 9 and 10, which seek to extend the application of the general anti-abuse rule to national insurance contributions. The GAAR, which came into force on Royal Assent of the Finance Act 2013, incorporates income tax, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty, land tax and the new annual tax on enveloped dwellings.
	A number of Opposition Members raised the concern that the GAAR is intended to prevent only “highly contrived tax avoidance” that has “abnormal features”. The man who designed the GAAR, Graham Aaronson QC, believes that it is
	“clearly intended to apply only to egregious, or very aggressive, tax avoidance schemes”.
	What deterrent effect is such a narrowly drafted GAAR expected to have? As the Government’s flagship policy for tackling tax avoidance, what dent will the GAAR make on the tax gap, which HMRC says is £32.2 billion a year?
	During the debate on the 2013 Act, I pointed out that the GAAR is expected to yield £60 million in 2014-15, rising to £85 million by 2017-18. I am more than willing to acknowledge that those are sizeable sums, but the point made in the House back in April was that it represented a drop in the ocean compared with the then tax gap of £32.2 billion.
	What has changed since? HMRC’s latest tax gap estimate, of the difference between what is collected and what would be collected if everyone complied with the letter and spirit of the law, concluded that it has increased to £35 billion, a staggering 8.7% increase in the space of 12 months. I accept that many dispute the figure and say it is too low—that it does not include much of what could be incorporated in the figure for tax avoided.
	The latest HMRC estimate, which covers 2011-12, indicates that some £15.3 billion of the gap can be accounted for by unpaid income tax, capital gains tax and NICs combined. HMRC suggests that approximately £4 billion of the gap arises out of avoidance “behaviour”. Will the Minister therefore clarify exactly how much of the £35 billion tax gap is thought to be made up of NICs that are unpaid through avoidance? Given that the Bill deals with only the most aggressive or egregious avoidance activity, how much will extending the GAAR to NICs yield for the Exchequer in additional revenue?
	The Opposition have raised many other concerns about the GAAR—my hon. Friend the Member for Birmingham, Ladywood mentioned the Swiss deal and the number of holes in that arrangement, which leave a hole in the Government’s estimates. However, there is also the highly subjective double reasonableness test, which can be used to determine whether a means of avoiding a tax can
	“reasonably be regarded as a reasonable course of action”.
	That subjectivity is helpfully explained in the GAAR guidance, which states:
	“The words ‘contrived’ and ‘abnormal’ are not defined, and therefore will be applied in their normal sense”.
	We have long argued that that is a fig leaf, or could be used as a fig leaf, for tacitly legitimising tax avoidance that does not fall within those definitions. We tabled amendments to ensure that the GAAR would be reviewed, and to assess its effectiveness.
	Most critically, we have questioned the independence of the advisory panel established by the Treasury to oversee the GAAR. At the time, I said:
	“What a tax expert considers to be reasonable might be regarded differently in the eyes of a member of the public. Indeed, many tax experts will differ on what they believe to be reasonable tax planning, as opposed to something egregious that would fall under the GAAR.”—[Official Report, 17 April 2013; Vol. 561, c. 425-426.]
	What has changed since April? A matter of weeks after being hand-picked to deliberate on the Government’s flagship anti-avoidance policy, one panel member was caught on camera at a tax planning conference offering tips to people on how to keep their money
	“out of the Chancellor’s grubby mitts”.
	HMRC’s website simply tells us:
	“David Heaton resigned from the Advisory Panel on 13 September 2013. Arrangements are being put in place to appoint a successor.”
	It would be helpful to hear from the Minister exactly what those arrangements are, when she expects the appointment to be made and, most importantly, how she and her ministerial colleagues will ensure that this never happens again. If the GAAR is to retain or, indeed, regain any shred of credibility, what are the Government going to do about that?
	As we have said, we back the Bill, especially the main provision—the employment allowance. We repeatedly called for changes to the previous national insurance holiday scheme and we consistently warned that it would be a flop. Many of the changes we called for will be introduced in the employment allowance, but it is disappointing that for hundreds of thousands of small businesses it has taken almost four years to deliver the policy that they need. They deserve better, but the Bill is a small step in the right direction today.

Nicky Morgan: This has been a wide-ranging debate and I am grateful to have heard all the thoughtful contributions that have been made. It is noticeable that we heard seven contributions from this side, but only one from Opposition Back Benchers—[Interruption.] I welcome the Opposition’s support for the Bill, but as the shadow Minister said, the Bill is wide ranging, and Opposition Members could have talked about businesses, employment and the living wage. They have not taken the opportunity to do so and clearly had nothing to say about the Bill.
	Before I respond to the points raised by hon. Members, it is worth reiterating the four key points of the Bill. First, from next April, all businesses, charities and community amateur sports clubs will benefit. They will receive a £2,000 employment allowance every year to set against their employer national insurance contributions liability. This is a measure specifically set out to support jobs. If I run a small firm employing four members of staff on the average private sector wage, I would see my national insurance contributions bill cut by more than a fifth. If I start a brand-new business and want to give
	up to 10 18 to 20-year-olds their first chance of full-time employment, paying the minimum wage, I would pay no national insurance contributions at all.
	We have previously had time-limited allowances targeted at some businesses, but this is a universal allowance that will help all businesses. It is easy to understand and administer and, most importantly, it will make it easier for businesses in all our constituencies to create jobs. I am sure that that is something that all hon. Members want to see.
	Secondly, as well as making it easier for employers to take on staff, the Bill will make it harder for companies to avoid taxes. It will give effect to the general anti-abuse rule, or GAAR, for NICs. As such, it is indicative of the Government’s intention to take a robust line in tackling all forms of tax avoidance. Thirdly, it will allow the Treasury to make regulations to bring in a certification scheme for the oil and gas industry when someone other than the deemed employer for national insurance is undertaking those duties on their behalf. This is part of the Government’s wider measure to address schemes involving employers setting up outside the UK and providing workers to the UK in order to avoid paying employment taxes.
	Finally, the Bill will make changes to tackle disguised employment and to address the tax issue arising from the UK implementation of the alternative investment fund managers directive, which the Exchequer Secretary described in some detail earlier. The importance of those last three measures should not be underestimated. With the associated tax changes they will contribute towards raising £265 million for the Exchequer in the 2014-15 tax year.
	As I have said, we heard some excellent contributions to the debate. I am sorry to say that the Labour contributions did not extend to any great insight into the Labour party policy on support for businesses. First, Opposition Members tried to take credit for this Bill, if hon. Members can imagine such a thing. The shadow Chief Secretary said that we should say sorry. If sorry is the hardest word, we have never heard it from the Labour party, which left us—as my hon. Friend the Member for Macclesfield (David Rutley) said—with the legacy of a huge deficit and enormous debt that we are having to pay off. This Government are having to make the tough choices.
	The hon. Member for Birmingham, Ladywood (Shabana Mahmood) was wrong about the Labour party’s national insurance contributions scheme, because it would have applied only to small businesses. Our scheme will apply to all businesses. She also said that administration of the previous scheme cost £12 million. In fact, the estimated administration costs from the start of the national insurance contributions scheme that finished in September were £770,000—nowhere near millions of pounds. There was tight control on its administration.
	We will not take a history lesson from the Opposition about the regional national insurance contributions holiday. My hon. Friend the Exchequer Secretary made it clear at the start of the debate that this was a temporary, targeted measure that helped 26,000 businesses and created 90,000 jobs. That is 90,000 people who have employment as a result of that scheme. That is something that we should be proud of, while recognising that there is scope for a new scheme, and that is what the Bill will introduce.
	On the GAAR, the Opposition had 13 years to introduce it, but they failed to do so. They can pick holes in the scheme as much as they want, but the point is that this Government have taken the tough decisions. The rule will act as a deterrent to those tempted to engage in abusive avoidance schemes. It will take time to bed in, and we will keep it under review.
	In answer to the specific questions asked by the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), the GAAR is expected to raise some £235 million over the next five years and it will also protect revenue that would otherwise be lost. We are confident that the GAAR will change the avoidance landscape as its impact starts to be recognised. The hon. Lady also asked about the Bill not being published in draft, but she then said that we had taken a long time to get round to making the Bill happen. She cannot have it both ways, although that is a position the Labour party always likes to be in.
	The employment allowance will be introduced from 6 April next year. If we had had time for formal consultation, it would have delayed the implementation date, which is something that none of us wants to see. However, I can tell the hon. Lady that HMRC has held discussions with various stakeholders over the summer on the detailed implementation of the employment allowance, and those discussions have helped to inform the design of the new system.

Catherine McKinnell: I thank the Minister for responding to some of the questions that I raised. She seems to be moving away from the subject of the GAAR, but I wonder if she could address the questions relating to the advisory panel and the member who was dismissed from it in disgrace. What will the Government do to ensure that that does not happen again and that the credibility of the GAAR advisory panel, which was dented by those events, is restored?

Nicky Morgan: Perhaps I should repeat my comments. This Government should get enormous credit for introducing a GAAR in the first place. The last Government had 13 years to introduce one and failed to do so. The important point about the panel is that it is independent. It was recommended by Graham Aaronson, and its members are independent from the Government. The gentleman in question has resigned. It is an important safeguard in the operation of the system that the panel’s independence is maintained.
	I turn now to the excellent contributions from Back Benchers, especially on this side of the House. My hon. Friend the Member for Stourbridge (Margot James) talked about charities benefiting from the Bill. It is very welcome that they will benefit as they employ 800,000 people. She also talked about the huge step of taking on the responsibility for that first employee. She is absolutely right about that and I am sure that all hon. Members will wish the very best to the lady who is opening the new floristry business in my hon. Friend’s constituency.
	My hon. Friend the Member for Redcar (Ian Swales) was right to say the Bill offers real help to small businesses, and that taking on the first employee and worrying about how to pay their national insurance puts firms off growing. This is an important measure to support the next step on the employment journey.
	The hon. Member for Edinburgh East (Sheila Gilmore) found it strange that we were looking at the Labour party’s national insurance policy. First, her party wants to be the next Government, so it should not be a surprise that we scrutinise its policies. Secondly, we are still having to deal with the legacy of the previous Government. All the tough decisions we take are framed by having to deal with that legacy. I should, however, congratulate her on being the only Labour Back Bencher to speak in the debate. She asked whether the employment allowance would create jobs. The Federation of Small Businesses expects 29% of small businesses to use it to boost staff wages, 28% to use it to employ additional staff and 24% to use it to invest in resources—it is welcomed by business organisations. It is estimated that 90% of businesses that employ people will take up the employment allowance. I am sure the hon. Lady will welcome businesses in her constituency taking up the employment allowance.
	My hon. Friend the Member for Bedford (Richard Fuller) asked whether tax credits had been factored into the system. We do not believe that tax credits have been factored into this calculation, but the Office for Budget Responsibility considers the net impact of all Government policies on the economy. This policy has been subject to that scrutiny and I am sure we can discuss any further questions he has. He made a thoughtful contribution on the price of labour and the affordability of the living wage. I am sure that that is something we want to consider further. He is right to say that the employment allowance is a small but important start along the road of getting more people into employment. He was right about the encouragement of welfare dependency by the previous Government. By 2010, nine out of 10 families with children were reliant on the state. We want to make work pay. For example, our policy of raising the income tax threshold is all about ensuring that work pays and that people keep more of their earnings so they can spend them in a way that is right for them and their families.

Sheila Gilmore: Will the Minister reflect on the fact that many households are worse off as a result of the Government’s policies on tax and tax credits? Many families are not seeing any benefit—quite the reverse.

Nicky Morgan: Of course the Government recognise that living standards are under pressure and that household budgets are being squeezed, but it is interesting that the Labour party’s calculations on household income and wages and earnings never factor in tax cuts. We are factoring in tax cuts and ensuring that people keep more of their own money.
	My hon. Friend the Member for Gosport (Caroline Dinenage) made a characteristically excellent speech. She talked about the support the Bill will give by extending the employment allowance to small businesses and charities, and mentioned that she had been a small business owner herself. It is noticeable that many Government Members have run their own businesses. She rightly said that we want to make Britain business-friendly.
	My hon. Friend the Member for Skipton and Ripon (Julian Smith), who also ran his own business before entering this House, did a sterling job in delivering his
	speech despite having lost a contact lens—none of us noticed. He made an important point about communicating with small businesses via Her Majesty’s Revenue and Customs, something I am sure Ministers will bear in mind. He also talked about making the employment allowance simple to administer. As my hon. Friend the Exchequer Secretary said in his opening remarks, the employment allowance will be delivered through employers’ standard payroll software and HMRC’s real-time information system. There will be no need for a separate application form or an annual return to report deductions. There will, I hope, be no extra forms, which is good news for small businesses.

Ian Swales: I warmly welcome that simplicity. Does the Minister regret, as I do, the previous Government’s practice of announcing measures that were so complicated that they then asked the Treasury to calculate the savings that would accrue from non-take-up?

Nicky Morgan: My hon. Friend’s intervention says it all. Government Members have run small businesses and know that we need to keep paperwork, in all its forms, as simple as possible. People who run businesses do not want to spend their evenings and weekends filling in forms. They want to spend that time growing their businesses and taking on their next employee.

Catherine McKinnell: The Minister is making a powerful argument, but it leads to the question: why did the Government introduce a national insurance holiday scheme in 2011 that was so complicated they could reach only 6% of the businesses it was targeted at?

Nicky Morgan: We heard earlier on that that was a time for a temporary target. We were dealing with the deficit and coping with the legacy left to us by the previous Government. We now have the opportunity to introduce a wider employment allowance. The hon. Lady should not try to teach us lessons about schemes, given the complexity of their scheme, which thankfully, they did not have the opportunity to introduce. How can the fact that 26,000 businesses have benefited and 90,000 jobs have been created be a failure?

Andrea Leadsom: Does my hon. Friend find it as amazing as I do that Opposition Members can only snipe at schemes that are clearly designed to appeal to existing small businesses and will incentivise the starting up of new small businesses, which is what our economy desperately needs?

Nicky Morgan: My hon. Friend is right: that is exactly what our economy needs. I have been at the Dispatch Box only a few times, but, sadly, I am not surprised to see the Opposition sniping. That is exactly what we expect. The parties on the Government Benches are about action and putting in place measures to help businesses to take on their next employee.
	My hon. Friend the Member for Macclesfield (David Rutley) talked about a culture of entrepreneurialism. I am glad that he had a slightly larger audience than the one he had on Friday, but his remarks have been heard and noted—he should have no fear on that score.
	My hon. Friend the Member for Folkestone and Hythe (Damian Collins) made a thoughtful contribution, in which he spoke of the Government having put in
	place a package of measures to support businesses. He mentioned the regional growth fund, which is making a difference in our constituencies to businesses large and small, and the investment culture. Hon. Members rightly paid tribute to his work to support start-up businesses through all manner of schemes.
	I am grateful to have had the opportunity to respond to most of the issues raised. The Bill will help to continue to support a stronger economy in the United Kingdom. It will make avoiding tax harder and make creating jobs easier. I commend the Bill to the House.
	Question put and agreed to.
	Bill accordingly read a Second time.

NATIONAL INSURANCE CONTRIBUTIONS BILL (PROGRAMME)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),
	That the following provisions shall apply to the National Insurance Contributions Bill:
	Committal
	(1) The Bill shall be committed to a Public Bill Committee.
	Proceedings in Public Bill Committee
	(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 28 November 2013.
	(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
	Consideration and Third Reading
	(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.
	(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
	(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on
	Other proceedings
	(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Anne Milton.)
	Question agreed to.

NATIONAL INSURANCE CONTRIBUTIONS BILL (WAYS AND MEANS)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
	That, for the purposes of any Act resulting from the National Insurance Contributions Bill, it is expedient to authorise—
	(1) provision for, and in connection with, the application of the general anti-abuse rule in relation to national insurance contributions;
	(2) the payment into the Consolidated Fund of any increase attributable to the Act in the sums payable into that Fund under any other Act.—(Anne Milton.)
	Question agreed to.

Business without Debate

European union documents

Motion made, and Question put forthwith (Standing Order No. 119(11)),

FINANCIAL AUDITS

That this House takes note of European Union Documents No. 16971/11 and Addenda 1 and 2, a draft Directive amending Directive 2006/43/EC on statutory audits of annual accounts and consolidated accounts, and No. 16972/11 and Addenda 1 and 2, a draft Regulation on specific requirements regarding statutory audit of public-interest entities; and supports the Government’s view that many of the concerns about the proposals have now been addressed in the compromise text that formed the basis for a Council mandate for the informal trilogue negotiations, which the Council is now taking forward with the European Parliament and Commission.—(Anne Milton.)
	Question agreed to.

COMMITTEES

Eleanor Laing: With the leave of the House, we will take motions 5 to 17 together.
	Ordered,

Backbench Business

That Jane Ellison be discharged from the Backbench Business Committee and Mr Mark Spencer be added.

Business, Innovation and Skills

That Julie Elliott be discharged from the Business, Innovation and Skills Committee and Mr William Bain be added.

Communities and Local Government

That Andy Sawford be discharged from the Communities and Local Government Committee and Chris Williamson be added.

Defence

That Penny Mordaunt be discharged from the Defence Committee and Mr James Gray be added.

Education

That Charlotte Leslie be discharged from the Education Committee and Mr Dominic Raab be added.

Energy and Climate Change

That Barry Gardiner be discharged from the Energy and Climate Change Committee and Graham Stringer be added.

Environment, Food and Rural Affairs

That George Eustice and Barry Gardiner be discharged from the Environment, Food and Rural Affairs Committee and Jim Fitzpatrick and Mr Mark Spencer be added.

Home Affairs

That Steve McCabe, Bridget Phillipson and Chris Ruane be discharged from the Home Affairs Committee and Ian Austin, Paul Flynn and Yasmin Qureshi be added.

International Development

That Richard Burden and Mark Pritchard be discharged from the International Development Committee and Sir Tony Cunningham be added.

Justice

That Mike Weatherley be discharged from the Justice Committee and Mr Christopher Chope be added.

Public Administration

That Charlie Elphicke be discharged from the Public Administration Committee and Mr Andrew Turner be added.

Transport

That Lucy Powell and Iain Stewart be discharged from the Transport Committee and Jim Fitzpatrick and Miss Chloe Smith be added.

Work and Pensions

That Jane Ellison and Mike Freer be discharged from the Work and Pensions Committee and Kwasi Kwarteng and Dame Angela Watkinson be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

PETITIONS

Rural Fair Share Campaign

Eleanor Laing: Before I call the 31 petitions to be presented, I must explain to the House how we will deal with their large number. Once the first petition relating to the rural fair share campaign has been read to the House, with its prayer, subsequent petitions on the same topic should not be read out in full. Members should give a brief description of the number and location of the petitioners and state that the petition is “in the same terms”. Members presenting more than one petition should present them together.
	When a Member has presented a petition, he or she should proceed to the Table and hand it to the Clerk, who will read its title and then hand it back to the Member. He or she should then proceed directly to the petitions bag at the back of the Chair. I will call the next Member immediately after the Clerk has read the title. At the expiry of half an hour, no further petitions may be presented orally, but they may be placed in the petition bag and will be recorded as formally presented. If all Members speak and move swiftly, all 31 petitions should be able to be presented and no one will be left out.
	I call Mr Graham Stuart to present his petition.

Graham Stuart: Thank you, Madam Deputy Speaker. I also thank Mr Speaker for allowing so many of us to present our petitions this evening. In fact, 119 petitions have been returned from constituencies around the country. Usually, at the close of business, the House empties, but instead, this evening, it has filled up with colleagues who have come to send a strong call from the countryside, a cry from the heart of England. I am delighted to see that the Secretary of State and the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis), are present to hear from us tonight.
	Contrary to the myth, rural residents earn less on average than people in cities and pay council tax that is £76 a head higher, yet they see urban areas receive 50% more per head, despite the obvious higher cost of delivering many services in a rural area. We are calling on the Government to make a change; all we ask for is a rural fair share.
	The petition states:
	The Petition of the residents of Beverley and Holderness,
	Declares that the Petitioners believe that the Local Government Finance Settlement is unfair to rural communities; notes that the Rural Penalty sees urban areas receive 50% more support per
	head than rural areas despite higher costs in rural service delivery; and opposes the planned freezing of this inequity in the 2013–14 settlement for six years until 2020.
	The Petitioners therefore request that the House of Commons urges the Government to reduce the Rural Penalty in staged steps by at least 10% by 2020.
	And the Petitioners remain, etc.
	[P001238]

Nick Harvey: I rise to present a petition in the same terms on behalf of 1,671 of my constituents, who are heartily sickened by this injustice and believe that a 10% improvement by 2020 is the very least that could be done.
	The Petition of the residents of North Devon
	[P001236]

John Whittingdale: I congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on launching this excellent campaign. I am handing in a petition in the same terms as his on behalf of my constituents from the village of St Lawrence. However, they speak on behalf of all the residents of the Maldon district.
	The Petition of the residents of Maldon.
	[P001235]

Daniel Kawczynski: I rise to support my hon. Friend the Member for Beverley and Holderness (Mr Stuart) and to hand in a petition in the same terms with 71 signatories from my constituency. The petitioners therefore request that the House of Commons urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020.
	The Petition of the residents of Shrewsbury and Atcham.
	[P001234]

Brooks Newmark: I, too, am handing in a petition in the same terms for more than 200 signatories from my constituency. The petitioners therefore request that the House of Commons urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020.
	The Petition of the residents of Braintree, Essex.
	[P001233]

Edward Garnier: I am also handing in a petition in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart) from residents in my constituency.
	The Petition of the residents of Harborough.
	[P001239]

Roberta Blackman-Woods: I, too, am handing in a petition in the same terms for a number of signatories from my constituency. Although my constituency is the City of Durham, it has a large rural area and, critically, is part of Durham county council, a large rural authority that wants its rural fair share.
	The Petition of the residents of City of Durham.
	[P001240]

Sheryll Murray: I present this petition on behalf of a very large number of my constituents in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
	The Petition of the residents of South East Cornwall
	[P001249]

Liam Fox: I am handing in a petition in the same terms for 435 signatories from my constituency and another petition also in the same terms on behalf of 812 signatories from the constituency of Weston-super-Mare in pursuit of natural justice for the rural parts of this kingdom.
	The Petition of the residents of Weston-Super-Mare Constituency.
	[P001247]
	The Petition of the residents of North Somerset Constituency.
	[P001248]

Stephen Phillips: I rise to hand in a petition in the same terms as that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart) signed by 316 of my constituents and praying ever in the like terms.
	The Petition of the residents of Sleaford and North Hykeham Parliamentary Constituency.
	[P001246]

Jacob Rees-Mogg: The petitioners of North East Somerset echo Margaret Thatcher when she went to Europe and said, “We want our money back.” They want their rural fair share in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart), and they present their petition with the greatest and humblest respects to the House.
	The Petition of the residents of North East Somerset.
	[P001244]

Andrea Leadsom: I am handing in a petition in the same terms as that of my hon. Friend the Member for Beverley and Holderness (Mr Stuart) for 551 signatories from my constituency, including representations from 29 villages.
	The Petition of the resident of South Northamptonshire.
	[P001243]

Damian Hinds: I, too, am handing in a petition in the same terms for a number of signatories from my constituency. The petitioners therefore request the House of Commons to urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020.
	The Petition of the members of Liss Parish Council, Liss, Hampshire.
	[P001242]

Ian Liddell-Grainger: I am handing in a petition in the same terms from 1,953 petitioners in my constituency.
	The Petition of the residents of the Bridgwater and West Somerset Constituency.
	[P001250]

Annette Brooke: I am handing in a petition in the same terms from the Purbeck part of my constituency and other neighbouring Purbeck wards. The petitioners therefore request that the House of Commons urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020.
	The Petition of the residents of Wareham, Dorset.
	[P001251]

Anne McIntosh: It gives me great pleasure to petition the House on behalf of the residents of Thirsk and Malton. They believe that the local government finance settlement is unfair to rural communities, and note that the rural penalty sees urban areas receive 50% more support per head than rural areas, despite higher costs in rural service delivery. May it please the House to note that the Select Committee that I have the honour to chair has recently produced a report on this same issue, and that we have received a very disappointing Government response. I hope that we can link our report to these fair share petitions.
	The Petition of the residents of Thirsk and Malton.
	[P001252]

Alan Beith: I wish to present this important petition from my constituency, much of which comprises the most sparsely populated area of England. It suffers from being linked with a unitary authority and therefore has an even worse rural penalty in some of its rural areas. I draw these matters to the attention of the Secretary of State as I bring the petition to the attention of the House.
	The Petition of the residents of Berwick-upon-Tweed constituency.
	[P001255]

Julian Lewis: It is my pleasure to present a petition in the same terms as that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart). It is signed by Mr Peter Osborne and other residents of the villages of Minstead, Lyndhurst, Bartley and Bramshaw in the New Forest East constituency, and it requests that the House of Commons urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020.
	The Petition of the residents of New Forest East Constituency.
	[P001254]

Harriett Baldwin: I am handing in a petition in the same terms for 128 signatories from the beautiful town of Pershore and the villages around Bredon Hill in my constituency.
	The Petition of the residents of West Worcestershire.
	[P001268]

Sarah Wollaston: I am presenting a petition in the same terms on behalf of people from Loddiswell and Dartmouth in my constituency, who speak for my entire constituency in recognising that the cost of providing services in rural areas is far higher and that the settlement should be based on age as well as deprivation.
	The Petition of the residents of Loddiswell.
	[P001258]

Neil Parish: I present this petition on behalf of the villages and towns of my constituency. The petitioners therefore request that the House of Commons urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020. It is delightful to see that the Secretary of State and the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Great Yarmouth (Brandon Lewis) are here tonight to deal with the matter.
	The Petition of the residents of Tiverton and Honiton.
	[P001259]

Priti Patel: I rise to present a petition in the same terms for a number of signatories from the wonderful village of Hatfield Peverel in my beautiful constituency.
	The Petition of the residents of Witham, Hatfield Peverel Ward.
	[P001261]

Stephen O'Brien: I am presenting a petition in the same terms as that of my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on behalf of 490 residents of the Eddisbury constituency in Cheshire. I am totally confident that they represent the tens of thousands of rural and village residents in the Eddisbury parliamentary division.
	The Petition of the residents of Eddisbury.
	[P001263]

Sarah Newton: I will be brief so that my remaining colleagues can present their petitions. I am handing in a petition, from a number of constituents in my very beautiful constituency of Truro and Falmouth, in the same terms as the one that has been so well presented by my colleagues.
	The Petition of the residents of Truro and Falmouth.
	[P001270]

David Ruffley: I am handing in this petition in the same terms for a considerable number of constituents from the great, historic constituency of Bury St Edmunds in the county of Suffolk. In particular, the signatories are from the villages around the two towns of Needham Market and Stowmarket. The petitioners therefore request that the House of Commons urge the Government to reduce the rural penalty in staged steps by at least 10% by 2020. May I add that I trust that Ministers will do a lot better than that?
	The Petition of the residents of Bury St Edmunds.
	[P001271]

Stephen Gilbert: I am handing in a petition in the same terms as those of my hon. Friend the Member for Beverley and Holderness (Mr Stuart) and the 23 other right hon. and hon. Members who have presented their petitions tonight. My constituents, like those in the 119 constituencies that have had similar petitions submitted to the House, simply want a fair deal.
	The Petition of the residents of St Austell and Newquay.
	[P001266]

PATIENT DIAGNOSTIC SERVICES

Motion made, and Question proposed, That this House do now adjourn.—(Anne Milton.)

Barry Gardiner: As it is the first time I have had the pleasure of speaking in the House since your election to the Chair, Madam Deputy Speaker, may I congratulate you and say how pleased I am to be speaking this evening under your guidance?
	The doctors and consultants in Brent, like those in the rest of the country, are highly respected members of our community. Their work is part of the glue that keeps our society together and enables people to function and get on with their daily lives. Doctors, though, would be the first to admit that they are not omniscient—well, some of them would. Their work depends upon the work of many others in the health care sector—in particular, the work of laboratory and radiography technicians who provide the evidential base for diagnosis and treatment. The quality of patient outcomes will always depend on the quality of diagnostic services because a diagnosis delayed is a treatment delayed, and an incorrect diagnosis is potentially fatal.
	This evening, I wish to detain the House and suggest to the Minister that the structural changes that his Government have introduced in the national health service have had a seriously adverse and dangerous impact on patient care.
	In May 2012, the decision was made to outsource pathology services in Brent and Harrow. Previously, it had been provided by the NHS at a facility at Northwick Park hospital. The decision was taken because the hospital wanted to invest in improvements to the system. Rather than incur those financial costs, it was considered more efficient to outsource the contract to TDL Ltd—otherwise known as The Doctors Laboratory. That was a mistake.
	The first indication that there was a problem came when a GP identified a serious technical flaw in the way patient test results were presented through the computerised system. The GP had received a list of multiple test results in respect of a patient. When looking at one set of results on the list and closing it or archiving it to the patient file, the GP realised that it was possible inadvertently to apply that same action to all the other test results returned on that list. Pathology results that required urgent action could be accidentally archived owing to an error in the TDL reporting system. Critical patient test results could be missed altogether or inappropriately actioned.
	The GP reported that as a serious incident and immediately flagged up the issue to the North West London Hospitals NHS Trust, on the assumption that pathology services were still being carried out there. In fact, the service has been provided by TDL since May 2012. The hospital trust passed the concerns on to the Brent and Harrow clinical commissioning group, which was now responsible for managing the contract with TDL. At that time, the matter was not thoroughly investigated and was deemed to be a single incident and not a cause for concern.
	However, GPs began to talk to each other about their concerns and realised very quickly that they were not alone in seeing a sudden change in the quality of results
	they were receiving from the service that had, up until 2012, been carried out adequately at Northwick Park hospital. At an emergency meeting with representatives of NHS Brent and Brent CCG, the GPs were led to believe that steps were being taken to resolve the matter.
	The problem got worse. GPs across the borough were receiving many more abnormal results than they would ordinarily expect: test requests were ignored or the results were never reported back to them; other tests were being returned incomplete with only partial results and data omitted; and some samples were being incorrectly marked as complete and being discarded without being tested.
	This alarming downward trend in the quality of the results finally prompted NHS Brent and NHS Harrow to launch a proper investigation, which commenced on 20 December 2012. Let me quote this root cause analysis investigation report, which finally reported in March of this year and found
	“spurious results, missing results and samples not processed...reference ranges had changed and...the presentation of the results into groupings that did not make sense”.
	One GP wrote to me to say:
	“In the new year the scale of serious anomalies and problems had become so great that individual practices started to send out e-mails to each other to see if the problems were as isolated as we were being led to believe…The response was shocking. Our patients are at serious risk. Unless we have these basic services reliably we cannot diagnose and treat our patients.”

Keith Vaz: The situation in north London is clearly shocking. Does my hon. Friend know whether any of the tests that were outsourced relate specifically to diabetes, which is a huge problem for people who live in Brent? About 10% of the population is thought to suffer from diabetes.

Barry Gardiner: I am grateful to my right hon. Friend for his intervention, and he is absolutely right that diabetes is a major problem in the Brent area. Given that many of the tests related to phlebotomy, I would assume that some of them might have related to diabetes, but I do not have that specific information to hand.
	I was explaining that GPs across the borough were receiving many more abnormal results than they would ordinarily expect, that the downward trend in the quality of the results had prompted an investigation and that the GPs had expressed their own concerns by exchanging information among themselves to ascertain the extent of the problem.
	The interim deputy director of quality and safety for Brent, Ealing, Harrow and Hillingdon CCGs reported
	“many incidents of patients attending for repeat blood tests at both the practice and within the hospital and some patients…referred to A&E Department because of high potassium levels.”
	Many consultants began to experience similar problems with the service and were also having to carry out further unnecessary tests. One consultant, when pressed, scribbled a note setting out a variety of issues:
	“Immunology—assay results; Calcium results—change in calculations; Change in reference ranges; Potassium—delays in transfer and refrigeration”.
	I am sure the Minister will agree that such failings in service are wholly unacceptable.
	The question then arises how any competent company of qualified health professionals could come to make such errors. After all, its website states that it is
	“providing quality accredited pathology services to the UK and worldwide”.
	I trust the Minister will be as surprised and as disappointed as I was to learn that, at the time the service was outsourced, TDL was
	“not currently registered with Clinical Pathology Accreditation (UK) but is working towards this”.
	The words “working towards this” should be accompanied by some degree of scepticism, given that the final report on the root causes of the problem identified that TDL was so incompetent that
	“There was an operational issue with the new robotic sorter which resulted in a number of samples being filed incorrectly as ‘analysis complete’ and subsequently discarded. There was also a problem with one of the lines in the calcium analyser as a result of which samples were transferred to another laboratory, and a number of issues were attributed to human error.”
	Compounding the confusion, when the service was transferred, TDL used different reference value ranges to assess and analyse results in order to fit in with its own IT systems. Unfortunately, it failed to communicate this change to the GPs or consultants who were now expected to interpret results that they did not understand, based on reference ranges with which they were not familiar. TDL was found to have not followed its own procedures, which required it to flag up to its service users when systems were changing. Owing to this transition, GPs and consultants were effectively left blind about the difficulties they might experience with pathology reports.
	Of course, the quality of any test results will always depend on the quality of the samples received. Just as in the world of computing, “garbage in leads to garbage out”. One would imagine that when the decision was taken to outsource the pathology courier service that delivers samples to the pathology laboratory, clear and appropriate clinical advice was sought about precisely how this contract should be specified—and it was. In fact, GPs suggested that a courier service carrying samples for potassium tests must be refrigerated in order to avoid the impact of temperature change on the quality of the sample. However, the terms of the contract failed to specify that, and the eventual service that was commissioned did not provide for temperature control.
	I have also received complaints about delays in delivery, as well as allegations that damage to samples in transit has made it difficult to record and analyse them properly. Indeed, the NHS Brent CCG noted in a report to the Brent health overview and scrutiny committee that issues of transportation quality and service delays on the part of the courier service, Revisecatch Ltd —trading as Courier Systems—
	“appear to play a seasonal role in the variation of potassium levels; in that they add to the instability of the samples due to fluctuation in temperature during storage at the GP practice and/or during transportation to the laboratory in both summer and winter”.
	Another privatised diagnostic service, the London NHS Diagnostic Service, is provided by InHealth. It is designed to enable London GPs to make direct referrals for their patients so that they have already had tests before being referred to specialist consultants. The tests might include ultrasound, echocardiography, audiology, cardiac physiology, magnetic resonance imaging, X-ray,
	endoscopy or phlebotomy scans. The intention was to reduce the CCG’s consultant costs by referring only patients who really needed their attention. In other words, GPs would filter patients to avoid unnecessary and costly referrals.
	GPs have objected that that practice has simply introduced a middleman to the process, and that delaying a diagnosis from a specialist consultant may put patients in danger. I am told that the problem is compounded because the scans received from InHealth are often themselves delayed, and are frequently found to be of such poor quality that the patient must be referred to a specialist consultant in any event. My office has also been given anecdotal evidence that staff at diagnostic centres do not possess the necessary skills or understanding to handle complex diagnostic services.
	General practitioners are not specialists. They are not consultants, and they are seeing scans which they cannot decipher or which are in a format that they cannot use. The patients are sent for another scan, or often are simply referred to the consultant whom they would have seen under the old system, who then usually orders a further scan at his or her own site. What started off as a way of saving money and freeing consultants to focus on clear cases of need becomes a bureaucratic process that puts patient outcomes at risk and costs more money as a result of duplication and delay. I should like to know from the Minister whether it is still the case that a patient has a statutory right to see a consultant, and whether a patient can insist on a direct referral from his or her GP without the interposition of additional diagnostic tests.
	However, it is not just those diagnostic support services that are being privatised; front-line diagnostic services are being outsourced as well. I am, of course, referring to the NHS 111 service. The service was designed to ease pressures on accident and emergency departments by providing telephone-based triage, but many criticisms have already been made of it. Reference has been made to patients’ calls being answered by medically illiterate staff and to failure to meet targets to transfer calls to a clinician or nurse within 60 seconds or return them within 10 minutes, and there have been stories of patients simply being referred to A and E departments because call centre staff do not know what alternative facilities are available.
	I do not wish simply to add to that catalogue of failings. My concern is more specific. In Brent and Harrow, we have an NHS 111 service that was awarded to Harmoni. That in itself was cause for some concern, as the company’s shareholders included the majority of the Harrow clinical commissioning group board that had decided to award it the contract. However, that is not the potential conflict of interest on which I wish to focus.
	The urgent care centre at Central Middlesex hospital happens to be owned by Care UK, the company that also now owns Harmoni. Let me make clear that I am not accusing Care UK of encouraging its NHS 111 staff to make referrals to Central Middlesex in the knowledge that they will benefit from the treatment of any patients at the urgent treatment centre there, because I have no information to suggest that that is the case. Nevertheless, it is clear that there is a serious conflict of interest that any contract must monitor and guard against.
	The interests of Care UK are clear, but its performance is not. I wrote to the Secretary of State for Health asking how the service in Brent had performed relative to the service specification. I asked,
	“how many calls have not been (a) answered, (b) referred to a clinician or trained nurse within the appropriate timescale or (c) in receipt of a call-back from an appropriate clinician within 10 minutes”.
	I received the following response:
	“Local commissioners are responsible for performance management of NHS 111 services, and set their own performance targets for services…Data…is not available in the format requested.”—[Official Report, 23 October 2013; Vol. 569, c. 213-4W.]
	In other words, the only people responsible for policing such conflicts of interest are the very people who have stood to gain from them.
	The final issue I wish to raise with the Minister is that of the National Clinical Assessment Service. In many respects, this could merit an Adjournment debate all of its own. NCAS was established to undertake performance assessments of GPs and clinicians when primary care or hospital trusts had expressed concern that their clinical results or statistics appeared to have been outside normal parameters. There are more than 1,000 referrals a year, and in the vast majority of cases NCAS will assist simply by advising the trust in order to return the clinicians to safe and effective practice. However, in 50 or 60 cases each year an extraordinarily detailed and intensive process of assessment and remediation is required. Only about 60% of those who undergo that process make it back into safe and effective practice, while 40% never return to work in the NHS. NCAS is therefore one of the key guardians of patient safety.
	In 2010, it became clear that NCAS would be restructured as part of the reconfiguration of the NHS. Its budget was cut by 20%, and it was told that it would have to become self-funding by 2013. In 2012, Deloitte was asked to conduct a review of the service, but it is due to publish its report only on 14 November, 10 days from now. In April this year, NCAS was joined to the NHS Litigation Authority, which has since consulted on a new structure prior to publication of the Deloitte report.
	I understand that senior clinicians in NCAS are deeply worried that the head of the NHSLA has simply dismissed the very serious concerns that senior and experienced practitioners fed into the consultation about the proposals and the impact they might have on patient safety. NCAS is now haemorrhaging junior staff, whom it is allowed to replace only with agency people. The advertisement for a replacement for the senior assessment adviser specifies that the person concerned must be someone on secondment, and for one year only. The restructuring proposals dispense with the post of the director responsible for the “back on track” service, but no one else in the service has the clinical capacity to perform the role.
	For some 50% of those who come for assessment, previously unidentified patient safety issues are revealed, often involving the cognitive impairment of the clinician himself or herself. I believe that before the proposed changes are allowed to proceed, the Minister must provide satisfactory answers to two questions. First, how will those patient safety concerns be discovered under the new model? Secondly, how will doctors who present a risk to the public be remediated and returned to safe and effective practice, given that the proposal specifically does not replace the key post with the clinical capacity to carry that out?
	The problems and failings I have outlined this evening are not a series of unfortunate but unrelated events, but the logical consequence of a restructured NHS that has put competition and cost, rather than patient care and patient safety, at the heart of the health service. There has been a failure to ensure quality commissioning of the services being provided. In fact, one GP has written to me noting:
	“It perhaps raises an interesting learning point for the future; that being if GPs are going to commission services and deal with private providers, what mechanisms are in place to stop patients being harmed by”
	our
	“negotiating a less than water tight contract? We are GPs not lawyers.”
	Certainly with respect to the takeover of the pathology laboratory by TDL, no risk assessment was carried out to predict the potential problems that might arise from a change in both system and process, and no suitable performance measures were implemented, nor was a structure of monitoring put in place to ensure that a good quality of service was maintained. The Health Secretary has been keen to argue that privatising these services is on the basis of improvements to patient welfare and sound clinical evidence. It is not.
	The awarding of the contract to Revisecatch Ltd shows that the clinical advice was ignored on the basis of cost, despite the clear implications for patient safety. The irony is that the subsequent change in contract specification almost always results in much higher costs, to the benefit of the private provider.
	Patient care and patient safety can only be prioritised in a system where transparency thrives. Only in such a system can mistakes be learned from and become the basis of better future practice, but it is not in the interest of private companies to disclose any aspect of failing service. The root cause analysis report notes:
	“The report provided by TDL on 08 March, was light on detail in parts and so it was difficult to identify lessons learned. TDL enjoy a good reputation and it is understandable that they would wish to protect this. However, in light of the requirements to put patients first and the duty of openness, transparency and candour, as recommended by Francis, it is felt that all involved could have been more open throughout the process.”
	This issue of transparency and openness will remain a serious challenge for as long as private companies compete for contracts on the basis of cost.
	Too many medical professionals are having to discover to the detriment of their patients that, for all their clinical expertise, they were never trained in the dark arts of commercial contract law, contract specification, negotiation and monitoring. It is the dogma of this Government that has put competition at the heart of our national health service, where patients should rightly be.

Daniel Poulter: It is a great pleasure to be speaking in the Chamber under your chairmanship for the first time, Madam Deputy Speaker. I congratulate you on your success in being appointed.
	I congratulate the hon. Member for Brent North (Barry Gardiner) on securing this debate. Before I correct some of the assertions he has made, I want to highlight the fact that the diagnostic services in England, and
	especially in Brent, are in rather robust health under this Government. Average waiting times for a diagnostic test remain low and stable, despite the NHS carrying out over 2 million more key tests a year since May 2010. The percentage of patients waiting six weeks or more at the end of June and July 2013 was 0.9% of the total number of waits. We can therefore see that the number of diagnostic tests is increasing, the availability of diagnostic services to patients has improved under this Government, and very few patients are waiting in excess of six weeks for the services provided.
	Latest provisional data from the diagnostic imaging dataset show that almost 32 million imaging tests were reported in England in the 12 months from June 2012 to May 2013. Diagnostics have a key part to play in reducing premature mortality, particularly as NHS England estimates that over 1 billion diagnostics tests are carried out within the NHS every year. Access to safe and high-quality diagnostic services, such as endoscopy, genetics, and imaging, is critical to all clinical pathways. They underpin over 80% of clinical decisions and they contribute to the holistic care of patients, not just single episodes of care.
	It is worth reminding the hon. Gentleman that the previous Government introduced, and championed the role of, the private sector. I believe we are all Blairites in this Chamber, in that we all believe in respect of publicly funded care that where the provider—be it the NHS, a private provider or a local charity or voluntary sector organisation—gives high-quality patient care, that has to be a good thing because it improves the quality of care. It is also important to highlight that the previous Government introduced private sector providers into the NHS to reduce waiting times for operations, which were unacceptably high at that time. I think we would all agree that it was a good thing that waiting times were reduced so patients no longer had to wait unacceptably long times for treatment they so desperately needed.
	The first independent sector treatment centres were opened in October 2003, under the previous Government, and they gave £250 million to private providers of independent sector treatments. To their shame, they paid the independent sector on average 11% more than the NHS price for the same treatment.
	Our intention in the reforms we introduced was to look at the mistakes the previous Government made in commissioning private sector services, to make sure there was a level playing field. There is no competition on price, as the hon. Gentleman asserted; there is only competition on quality in NHS services. It is important that any provider of NHS services and care to patients does so in an integrated way that delivers joined-up and integrated care based primarily in the community. Providing early diagnosis and early treatment and improving diagnostic services is a key part of that.
	The big challenge that faces the whole of the NHS and the health and care sector is the fact that many people are living longer, and often with multiple medical conditions like diabetes, dementia and heart disease. The challenge is to make sure that we treat them with dignity and respect. We must also make sure that when we can diagnose a problem or illness early, we do so. That is why we are very proud to have increased the amount of early diagnosis and the number of diagnostic tests available in our NHS. The remaining challenge is to make sure we continue improving early diagnosis in Brent, London and throughout the country.
	We know that when disease is diagnosed early, patients have a better chance of a good outcome. One-year survival for kidney and bladder cancers is as high as between 92% and 97%. At a late stage, however, it drops to between just 25% and 34%. The clinical case for early diagnosis and the investment we are making in diagnostic services is very clear, therefore.
	Of course, apart from the clinical benefits of early diagnosis, there are other benefits. When people are ill, they want to know as soon as possible what might, or might not, be the cause of their illness. Having to wait a long time for diagnostic tests can be hugely stressful for patients.
	Let me deal with the issues the hon. Gentleman raised about the commissioning of services. Since the beginning of April 2013, clinical commissioning groups have been responsible for commissioning many health care services to meet the requirements of their population. In doing so, CCGs need to ensure that diagnostic services are considered fit for purpose and reflect the needs of the local people as part of their process for commissioning clinical pathways. Local clinicians are best placed to understand the needs of their local population and commission the diagnostic services they need.
	Local clinicians are commissioning in a way that is increasingly effective in diagnostics and elsewhere, so more choice in diagnostic services is essential. Many patients who require diagnosis—perhaps an ultrasound scan—will be working, and traditionally some of the NHS diagnostic models have not embraced seven-day working. We know that it is much easier for working people to access NHS services in the evening or at weekends. Therefore, bringing providers that supply greater choice for patients into the NHS makes it much more likely that patients will receive appropriate services at the right time and in a convenient way. It also increases patient compliance, not only with treatments, but with making sure they have their scans and diagnostics in a timely manner.

Barry Gardiner: The Minister rightly says that clinicians are best placed to make clinical judgments about their patients’ needs, and there is no dispute between us on that. My concern is that in a case such as that of TDL the clinicians understood the clinical need but clearly did not have the expertise to ensure: that the contract was properly engaged in; that it was risk-assessed in the first place; that it was properly monitored; and that it was executed in a manner that was going to ensure the proper relationship between the practitioner and the tests that were being done. Similarly, on the courier service, they had the clinical evidence right, saying that refrigeration was needed, but when it came to putting the contract in place there was no such refrigeration.

Daniel Poulter: I hope that the hon. Gentleman will forgive me for saying that many of the contracts to which he is alluding were put in place under the old arrangements, before this Government’s reforms, which have delivered clinical leadership. Many of these contracts were negotiated under the powers put in place under the previous Government, whereby people without clinical experience often negotiated the contracts and so did not always understand what the important clinical factors
	were. He rightly raised the point about potassium and the refrigeration of biochemical samples. It is important that we preserve the integrity of all samples collected. Of course, a clinician, a biochemist or someone with clinical experience would understand that, whereas someone who is commissioning services without that background might not. We saw that happen far too often with primary care trusts. The clinical input under the new arrangements will put us in a much better place to commission services in the future. Many clinical commissioning groups have been saddled with those old arrangements and so are having to enforce arrangements and contracts that they did not directly negotiate. We hope that when the contracts come up for renegotiation that problem will be put right, thanks to the reforms that we have introduced. They will lead to clinical leadership at CCGs, so that doctors and nurses are in charge of negotiations, rather than people who have not necessarily had the relevant clinical experience and do not have the knowledge to understand what the contract they are commissioning is about. National frameworks are being developed for some commissioning contracts by NHS England. So if concerns arise locally on the part of a CCG about the commissioning of contracts, NHS England is always available to provide advice.
	I wish to reassure the hon. Gentleman that not just any old health care provider can deliver diagnostic services. By law, health care providers must register with the Care Quality Commission to carry out diagnostic services. That helps to ensure that patients receive only high-quality care, because the CQC, to which the Government are granting greater independence and strengthened powers to intervene where there are quality of care concerns, is the organisation that will be able to intercede if there are concerns about the quality of any health care service which may affect patient care. Service providers must be registered with the CQC and they must prove that they can meet strict quality criteria. That regulated activity includes a wide range of procedures related to diagnostics, screening and physiological measurement, including all diagnostic procedures involving the use of any form of radiation, including X-ray, ultrasound or magnetic resonance imaging. Regulated activities are listed in schedule 1 of the Health and Social Care Act 2008 (Regulated Activities) Regulations 2010.

Barry Gardiner: The Minister will have been aware of the report on TDL in north-west London and in no sense could it have been said that a satisfactory service was being delivered. So why did the CQC not intervene in a timely fashion? Why, when the initial report by the GP was made about a serious incident, was it not taken seriously? Why did it take so long to make sure that these services were being provided properly and that my constituents were being kept safe?

Daniel Poulter: Clearly, the events that the hon. Gentleman has raised were distressing and appear to have caused difficulties for patients, and I know that local commissioners found that regrettable. I do not know whether the case was reported to the CQC. He will also be aware that the CQC has come on a considerable journey, from being an organisation that was not fit for purpose a few years ago to being an organisation, with new chief inspectors in place, that is in a much more robust state of health now. The Secretary of State has put in place a number
	of measures to beef up and improve the inspection regimes in all care settings. We now have a chief inspector of care, a chief inspector of hospitals and a chief inspector of general practice. Following the Francis inquiry, there is now much more transparency, openness and passing of information between health care commissioners at a local level and the CQC. That did not happen as effectively as it should have done in the past, and that was to the detriment of those in Brent.

Barry Gardiner: This was in 2012.

Daniel Poulter: Indeed, and the Francis inquiry took place this year and a lot of action has been put in place by the Secretary of State to recognise where there have been failings in the health system in the past. We know that the majority of the health service, however it is commissioned, be it through a provider of NHS services, through the voluntary sector or through private providers, provides fantastic care on a day-to-day basis. We are proud that we have a publicly funded health service that has many fantastic front-line staff—I count myself still to be one—who do a very good job of looking after patients.
	We know that things sometimes go wrong: the hon. Gentleman has highlighted what went wrong in his constituency and in the wider NHS things went wrong, very tragically, at Mid Staffordshire. We need to learn from those mistakes and ensure that they are put right in future, whether they are in the commissioning process—clinically led commissioning should put us in a much better place in that regard—or in the care that is provided to patients. We need to ensure that all hospitals, as well as other health care providers and care sector providers, step up to the plate, recognise that patient safety must always be paramount and ensure that the lessons that need to be learned from the Francis report are learned. My right hon. Friend the Secretary of State will report back to the House in due course—later this month, I believe—with further recommendations that will, I hope, reassure the hon. Gentleman.
	In conclusion, let me turn specifically to diagnostic services in Brent. I am aware that the hon. Gentleman has recently asked questions about referral processes for diagnostic services provided in his constituency. As he knows, the contracts for those services were originally
	let by the then PCT under arrangements encouraged by the policies of the previous Government and are managed by the North and East London commissioning support unit on behalf of the CCGs. The London NHS Diagnostic Service, provided by InHealth, offers GPs and other health care professionals direct access to high-quality diagnostic and imaging scans and tests throughout London delivered from a range of sites, including mobile, fixed and community-based facilities.
	I hope that it reassures the hon. Gentleman to hear that between September 2010 and August 2011, 2,397,018 diagnostic tests were carried out in London but more recently, between September 2012 and August 2013, there was an increase of about 300,000 to 2,651,560. That shows that the service in London is in robust health and is being used to facilitate scans and other procedures to diagnose many more patients today than two to three years ago.
	I understand that the hon. Gentleman has been in communication with local commissioners and that the relevant NHS England area team has advised him that GP practices do not receive any referral payment when patients are referred to the London NHS Diagnostic Service provided by InHealth. I know that that is an area of concern to him and he was possibly suggesting that there might be some cosy internal relationship among local health care services to the detriment of patients. I can reassure him that that is certainly not the case. GPs make clinical decisions on the basis not of financial bribes, but of what is best for their patients. I hope that he will be reassured by the answer he has received from the commissioners and I do not think that it is in any way likely that GPs or other health care professionals will act in a way that is outside the best interests of their patients. It has always been my experience that front-line health care professionals, with very few exceptions, act with openness and integrity and always advocate for their patients’ needs. I hope he will be reassured by that.
	I hope that the hon. Gentleman is reassured that diagnostic services are in robust health under this Government nationally, and in Brent.
	Question put and agreed to.
	House adjourned.